admin
November 8, 2007
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.