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Home > Business > Special

Should big brands be running scared?

Molshree Vaid, | November 24, 2006

How picky can you really get about salt, dal, besan, chawal and stuff like that? Retailers who have launched all these commodities under private store labels say - very little. If quality is on par, cheaper prices, sometimes down by 20-30 per cent, guarantee that most buyers will cheat on big brands.

In fact Pantaloon and Reliance Retail are soon going to branch into personal and home care. So should big brands be running scared? Maybe not just yet, but they need to step on their innovation and branding effort if they expect to survive the onslaught.

When it comes to buying spices and daily groceries, more often than not it boils down to the price in figures, while choosing recognised brands and private labels.

Retailers like Pantaloon's Food Bazaar and RPG's Spencers claim that their own private labels or store brands are already chipping in between 10 to 15 per cent of the total sales. This is especially true in categories where quality is not the purview of a select few and where big brands are not present.

President and CEO, Food division, Pantaloon, Damodar Mall told CNBC-TV18, "Half of the consumer's basket is unbranded. It's now seen in the most specialized food space, where you'd think people would like brand confirmation to support their buying. We believe there's room even in the personal and home care space, where brands that are supported or launched by modern trade will be able to take significant market share."

Big pedigreed brands say that modern retail chains currently contribute to just 10 per cent of their total sales. However, they are already gearing up in anticipation of shift in the balance of power. They have deployed a separate sales team to service supermarkets, offer higher margins and even run specific store promotions. But they will have to do a lot more to counter the tough attack from private labels, it appears.

They will have to spend more on advertising. Players like ITC Foods and Britannia are expected to increase their adspend. At Rs 340 crore (Rs 3.4 billion), Hindustan Lever's adspend for the second quarter was up 40 per cent. Clearly the only thing that will rescue the big brands are emotional bridges built around advertising, with a clear focus on delivering the next level or generation of products and thereby conveying brand benefits. 

MD, Heinz India, Nilesh Patel says, "In India, we've launched home-made chutneys which is very specific to India and are looking at similar products in the sauces and foods category. Overall, it's a combo of innovations in products, packaging as well as advertising that brands will need to focus on, going forward."

But it is in the commodities space, where innovations are limited, that pricing will be critical. Which is why, Kohinoor Basmati rice could end up as Reliance Select or Food Bazaar rice.

Meanwhile, retailers are already looking at new categories to enter, such as oral care, soaps and cosmetics. Traditionally though, such categories have been tough to crack since the space is occupied with companies like Hindustan Lever and Marico. Experts suggest that in mature markets like Europe, players like Unilever and P&G have been innovating, enough to keep the emerging threats at bay-at least for the time being.

Head, Food & Drink, Transaction Services (Europe), KPMG, Erwin De Spiegeleire says, "They are shifting big sum of money to R&D since they are absolutely convinced in the technology in their product and believe that they'll have an technological advantage on powders, creams and make-up type products."

According to an AC Nielsen study, 56 per cent of Indians believe that supermarket brands are a good alternative to other brands. This could be due to the fact that consumers are more likely to trust a brand when it comes to creams, shampoos and powders, than groceries and vegetables, which can be hand-washed and stored.

So, as the big-ticket shopping war shifts to supermarkets arena, a slugfest is certainly assured for consumer loyalty.

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