Private-label products are increasingly posing a threat for FMCG companies in India, a new report from Datamonitor has suggested.
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According to the consumer survey, The Impact of Private Labels on FMCG Companies in India, while the adoption of private labels started due to their value proposition, consumers now perceive these store brands as offering comparable quality to national brands.
“The increased scale of operations of retailers is shifting the bargaining power from FMCG companies to retailers. The growing adoption of private labels can compel FMCG companies to reassess their trade margins or relationship with retailers”, Vaibhav Khera, director if India consumer markets research at Datamonitor, suggested.
Indian retailers are emphasising the growth of their private label brands, which is resulting in margin expansion and providing greater bargaining power in negotiations with FMCG companies, Datamonitor contended.
Retailers, who started launching private labels as value alternatives, are now mirroring national brands but offering these products at a lower price. Retailers are also launching products with tiered pricing to cater to a wider audience while maintaining store positioning.
Though private labels are increasingly gaining a foothold in the organised retail segment, FMCG companies can avoid this competition by investing in innovation and product differentiation.
“FMCG companies should play on their strengths and monetise opportunities emerging due changing consumer behaviour,” Vaibhav suggested.
