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Such a deal is bound to effect sales of private labels in a positive way but would also block the entry of some competitors in the market. This initiative has seen a range of companies such as Bourbon biscuits, Cremica biscuits, Pogo chips, Dynamix ghee etc has grab the opportunity and the take the plunge.

According to Muni Garg, marketing head, Bonn Foods Industries said their tie up with Aditya Birla Retail to make cookies under the Feasters has only helped them increase the biscuits volumes. Similarly, Vishal Malik, marketing head, Cremica biscuits said their deal with More was to help Bector Foods Specialties to make inroads in the southern market, as per media reports.

So far it seems like a win-win situation wherein retailers to match up with national brands in quality and packaging are seeking contract manufacturers with product line expertise. MNVV Prasad, DGM (sales and marketing), Indo Nissin Foods said, “If price-conscious consumers enjoy the private label and realise that it is also manufactured by Indo Nissin, they are likely to pick up Top Ramen at another store,” as reported by media.

“There are very few non-branded food FMCG manufacturers in India due to the shortage of incentives in this sector. Therefore, with retailers vouching for quality products they find the need to tie up with existing brands,” said Saloni Nangia, VP, consumer goods and retail, Technopak.
Over the last one year or so, because of the economy slowdown and inflation forcing consumers to go for the cheaper options available in the market, it has made private labels gain traction. While it’s been a situation of collision between big retailers and consumer product makers over trader’s margins, it has led to a number of private product launches by retailers, not to forget, in some cases, even pulling out of big brands from shelves.

Moreover, because the branding efforts for retailers are constrained to in-store display and product promotions only, it has helped them to price their own products at a much cheaper rate then the branded products. In the words of Mohit Kampani, VP, merchandising food and FMCG, Spencer’s Retail, which has tied up with Kolkata-based Gee Pee Foods said, “Regional players are often keen on partnering with retail chains because raw material price increase doesn’t go out of their margins. It becomes a means of keeping their cash flows strong.”

However, though it’s a slight hit in the profit margins of the manufacturers ranging anything between 10-15 per cent less than own brands depending upon product category, they are still happy as now they do not have to bother about things like channel distribution, branding, expiring damages and product promotion.

Also, retailers to avoid any kind of tiff with the bigger brands have maintained their stand of not influencing presence of other brands across stores. “The shares of visibility of these brands are completely driven by category management objectives,” said Thomas Varghese, CEO, Aditya Birla Retail.

But all this and more doesn’t seem to have affected the national brands a great deal. As of now they are maintaining that there has not been any dent in their sales figures because of the presence of such regional FMCG labels. But on the other hand, private labels such as Nissin, Dynamix, Bector’s Gee Pee Foods, Bonn Foods, Lee Bee Foods, Shanta Foodchem and VLS Foods seem to very keen on such an arrangement and have quickly the opportunity.