India’s Retailers Need to Cultivate ‘Trust’ in Their Private Label Brands: ACNielsen Global Consumer Survey
Packaging and ‘Budget’ perception the major challenges for India’s Modern Trade

5 October, 2005
Mumbai
India’s internet savvy consumers aren’t as convinced about private labels as their global counterparts, according to a Global Private Label Consumer Study by ACNielsen, the world’s leading marketing research and information company. While globally four in five consumers in the developed markets of Europe, the Pacific and North America consider ‘Supermarket-Own’, or ‘Private Label’ brands to be good alternatives to other manufacturing brands, only 56 percent of Indians agree with them.

The global ACNielsen Online Consumer Opinion Survey, the largest of its kind, polled over 21,100 respondents in 38 markets from Europe, Asia Pacific, North America, Latin America and South Africa (See Table 1 for market breakdown). The study asked consumers around the world what they thought about Supermarket Own Brands as an alternative to other brands in terms of their quality, value for money, packaging and positioning.

“In India, the majority of mature Modern Trade shopper tends to be up-market, open to new ideas and researching them via the Internet for this particular study allowed us to derive more relevant insights,” explained Raghavan Ranganathan, Director, Retailer Services, ACNielsen India. “This study, for the first time, tells retailers what consumers think of private labels and offers them a good starting point to chalk out future strategies.”

Across the 38 markets, the majority of the Top 10 rating supermarket label supporters hailed from Europe – perhaps not surprising given the strong discounter presence - led by the Netherlands (91%), Portugal (89%) and Germany (88%). 

At the other end of the scale, eight of the Bottom 10 came from Asia, with Japanese and Malaysian consumers (35%) in least agreement that Supermarket Own Labels were a good alternative to other brands.

“As in other developing markets, Private Label awareness and acceptance in India will in part go hand in hand with the growth of the Modern Trade. In Asia, for example, share of the modern trade is currently running at 47 percent, and is expected to pass 50 percent by the end of 2005. In some of these markets, where the retail landscape is highly fragmented, a lot of shoppers are only just getting used to visiting supermarkets and hypermarkets regularly for their groceries, and Private Label is still a relatively new concept for them,” asserted Raghavan.

“Additionally, the attraction of well-known multinational and local manufacturing brands with strong brand equity, supported by heavy advertising, means that the appeal of Private Label is likely to be limited by its ’less specialized’ nature.” Raghavan continued.

Indians Expect more from Private Labels - Good Value for Money and Quality not enough
Consumers globally are in agreement when it comes to Private Label Quality and Value for Money, with a global average of 69 percent agreeing they were extremely good value for money, and 62 percent considering their quality to be at least as good as the big brands. 

Across the regions, consumers in the Pacific and North America were almost unanimous, with eight in 10 considering them extremely good Value for Money. They also agreed on Quality, with 72 percent in North America, and 70 percent in Pacific considering Private Label quality to be at least as good as the usual big brands. Europe followed closely behind with 73 percent agreeing on Value for Money and 68 percent on Quality. A majority (60%+) of Indians also consider Private Labels to be good value for money and offering quality similar to big brands.

“In India, where a vast majority of stores are the neighborhood kirana store, the Modern Trade ‘lifestyle’ is still considered premium in the market. This means that consumers are reasonably certain that Private Labels placed on the same shelves as large, well known brands, must satisfy a minimum standard of quality. Their slow development though suggests that the Indian consumer is far more demanding than most retailers imagine and that brand equity has a stronger bearing than minimum quality standards,” said Raghavan.

Not all Private Labels are Made Equal - For Indians, the Category makes the Difference
When asked if they thought there were some products where quality really mattered, not suitable for Private Label, a clear majority of Indian consumers (80%) agreed. This was in stark contrast to a global average of 40 percent, led by half the Latin Americans (51%) and Asians (48%). Even in highly Own Label-developed markets in the Pacific, two in five consumers (41%) agreed that there were certain products not suitable for Private Label. This was also agreed with by one third of consumers in Europe (35%). Only in North America did nearly one half of consumers (48%) disagree.

“Consumers may be happy with the quality of Private Label when it comes to kitchen towels, and commodities like sugar and flour, but are less convinced if they’re considering, say shampoo, baby food or their favourite food product, in less developed markets like India,” said Raghavan.

Private Label in India needs to Pack more Punch
The reasons for the relatively slow development for Private Label in India over the last two years were explained by consumer feedback. “ACNielsen’s global survey suggests that the visual cues and positioning provided by packaging are clearly deficient in Private Labels the country’s modern trade. 70 percent of Indians cited poor packaging as inhibiting Private Label purchase. This offers retailers food for thought about their Private Label strategy, and something to follow up on,” pointed out Raghavan.

Across Europe however, cheap packaging is certainly not an issue for retailers in Germany, Austria and Finland, where over two thirds of consumers disagree that Private Label packaging is cheap-looking. At the same time, there appears to be a packaging redesign opportunity for retailers in South America, Latin America, and Asia, where 44 percent, 40 percent and 38 percent of consumers respectively agreed that Private Label packaging was cheap-looking and off-putting. 

India’s Retailers need to Invest in Brand Building and Awareness
India’s modern trade shoppers also consider Private Labels to be ‘budget brands’ (67%) and claim that not knowing enough about these brands (70%) is most likely to be preventing them from considering adding these brands to their shopping baskets. This was in contrast to the global average of 42 percent who disagreed that this was the case for them. This was particularly felt by more than half of consumers in North America (56%), the Pacific (54%) and Europe (50%). Heading the top 10 ranking, two thirds of consumers in Finland (72%), Germany (66%), the Netherlands (65%) and Sweden (64%) also disagreed.

In tune with India, and presenting the biggest opportunity for retailers in developing markets, more than two thirds of consumers in Taiwan, Malaysia, Indonesia and the Philippines agreed that Private Label was for those that couldn’t afford the ‘best’ brands.

“It would appear that Indian retailers have a long way to go before Private Label threatens the supremacy of large, national manufacturer brands. Our survey clearly showed that the longer consumers have been exposed to Private Label – in terms of product life cycle and their penetration in stores’ total category volume sales – the better they think of them. Conversely, in markets where Private Label is less developed, consumers know less about them, and assume from their packaging and price that they are of lesser quality, aimed at people who can’t afford the bigger brands,” commented Raghavan.

Table 1

The 38 Countries Covered in the 2005 Global Consumer Confidence Study were:

Modern Trade refers to Supermarkets, hypermarkets, mini-markets and convenience stores etc.