Aditya Birla Retail to focus on reducing the number of private labels, increasing volumes from the existing ones
Pallabika Ganguly 12 July 2010

Private labels contribute 19%-20% Aditya Birla Retail’s total sales. It wants to reduce private labels to focus on volume sales

Aditya Birla Retail Ltd (ABRL) is betting differently on private labels, products that are sold by retailing companies under their own brand name. The company is now concentrating on increasing volume sales through special schemes in private labels rather than adding more products. It has reduced its private labels in fast moving consumer goods (FMCG) category to 290 from 350. In staples, private labels are more than 200. 

Sales from private labels are 19%-20% of the Aditya Birla retail's total sales. "We want to focus on individual categories and increase volumes rather than adding more products. We will be adding products as and when required in different categories," said Thomas Varghese, chief executive officer, Aditya Birla Retail Ltd. It is focussing on strengthening the food portfolio.

ABRL currently sells a range of private labels covering FMCG, apparels and footwear. Among its major in-house brands are More (staples), Blue Earth (apparels), True (footwear), Feasters (food based items), Kitchen's Promise (ready-to-eat) and Enriche (soaps and conditioners). Private labels in the stores are priced at 10%-15% less than branded labels.

The retail chain is also concentrating on increasing the customer base for its two-year old loyalty programme - 'Clubmore'. "We currently have a subscribed customer base of 1.3 million across India," said Mr Varghese.

The company plans to enter own branded consumer durables and electronics products when it has 14-16 operational hypermarkets. "By the end of this fiscal we shall have enough resources to introduce private labels in electronics. To begin with we will first introduce small appliances like irons, mixer grinders, beaters, etc. and then move to bigger white goods," said Mr Varghese.

Usually, private labels tend to be 5% to 20% cheaper than established brands. Retailers are able to cut out the distribution cost which they pass on to consumers.

Not only do private labels help retailers make more profits but these labels even help them to differentiate themselves from their rivals. And in the long run, they can use the private labels to additional attract customers.

Retailers are expanding their private label portfolio and targeting multiple consumer segments through tiered pricing and claims. Having established a significant presence in the household care segment, Indian retailers are now launching private labels in ready-to-eat foods, beverages and personal care. Retailers are building private label brands with product attributes that mirror national brands.

Adoption of private label by Indian consumers is not only based on price but also perceived quality. Success of private labels in the household category increases their propensity to try such prodcuts in the food and beverages and personal care categories.

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