Mint (partner to the Wall Street Journal), New Delhi – 8 November 2007
The shopping shelves of the Food Bazaar supermarket in Indirapuram
outside New Delhi are stacked with well-known brands such as
Britannia biscuits, Tropicana juices or Heinz ketchups. Sharing
the shelves are a host of obscure brands such as Lancer biscuits,
Chintamani namkeen and Fruitfil juices.
As millions of Indian consumers graduate from the traditional small mom-and-pop stores to the legions of emerging branded stores, modern retailers make sure that the consumers don’t lose out on small local brands that are relatively cheaper and are an integral part of the consumers’ grocery baskets. "It provides choice and value to the customers," said Arvind Chaudhary, chief executive of food business at Pantaloon Retail (India) Ltd, which owns the Food Bazaar chain. "Consumers need these products anyway and it completes their shopping baskets."
No wonder Food Bazaar and its hypermarket version Big Bazaar stock Prakash namkeen, Jade cookies, Manyos noodles, Nilon pickles, Garden farsan and Maniar brand of khakra (Gujarati snacks) among other local brands, constituting up to 15% of the hypermarket’s total processed food category.
Retailers say local brands are mainly targeted at price-sensitive customers. Sunil Jain, head of merchandising at discount retailer Vishal Retail Ltd, said local products are up to 20% cheaper than well-known brands. "We have all types of consumers, middle-class to lower-end," said Jain. As far as local brands are concerned, "we buy them at lower price and sell them at lower price."
Local brands also ensure better margins compared with the paper-thin margins by established brands. Vikas Srivastav, chief operating officer of Express Retail Services Pvt. Ltd, which operates 65 "Big Apple" grocery stores in the New Delhi region, said margins for local brands are 5-15% higher than known brands. Local brands constitute almost 12% of the firm’s product portfolio, he said.
Devangshu Dutta, chief executive of consultancy firm Third Eyesight, said the margins provided by local brands could be 15% more compared with a national brand, and it could be as high as 30%.
Mohit Khattar, president of marketing for discount retailer Subhiksha Trading Services Ltd, said in most cases the local products are "typically food products that are popular, but are not manufactured by the Hindustan Unilevers and the P&Gs of the world." He said low distribution cost and near non-existent marketing expense of local brands ensure better margins for retailers.
Pantaloon said the firm inspires local brands as part of a programme called Ethnic Food Development Programme. "We encourage them to put their products on our shelves, hand-hold them and ensure their products get visibility," Chaudhary said. The firm has even "adopted" some of the local brands as part of its private labels. There are even counters and shop-in-shop units for small brands in many Big Bazaar and Food Bazaar outlets.
Chaudhary said Pantaloon gives suggestions to small- and mid-sized firms on products, and help in their packaging by hooking them up with the Indian Institute of Packaging and other such groups.