Restructuring bug has bitten the promoters of Indian retail industry – maybe from the lessons they learnt during the slump. Aditya Birla Retail, promoters of MORE Supermarket retail are mulling the idea of spinning of their private label business into a separate entity, on the lines of what Mr. Biyani did – Future Brands where any store stocking this private label will pay 3% royalty to the Private Label company.
Birla’s are toying the idea after tasting some success with their own private label. They have been approached by a retailer to stock its Birla’s private labels and hence the renewed interest. Going forward, they want the private label business to be a full fledged FMCG company. As part of Pilot Project Vizag, it is already selling private labels through 30-40 small vendors. Aditya Birla already sees sales of 20% from its private label business. Some of its brands are – Feasters Noodles ,Kitchens Promise Pickles, Dishwash Bar and Fresh-ODent toothbrushes.
Tug of War:Lately, retail chains have started pushing their own private labels as the standoff between well established FMCG brands for trade margins continues.
Thomas Verghese, CEO of Aditya Birla Retail said,
In mid-2009 , in what it called Project Vizag , the company experimented with 30% shelf space for private labels across its stores in Visakhapatnam in Andhra Pradesh compared to 4-5 % space earlier. It also started advertising own brands within the stores. We had recorded a massive jump in sales which has remained consistent since then.
It will be interesting to see how things will unfold in the next few quarters – Will established FMCG Brands blink under pressure ?