By RJ Whitehead, 12-Aug-2013
India’s modern food retailers are adopting private labels at a faster pace than their counterparts in China - and in Europe before them - according to a new report from Rabobank, which says Indian retail reforms will likely boost the uptake of affordable private labels.
Rabobank examined private label products and found that growth in the segment is closely linked to the outlook for modern retail market penetration.
Last year, Indian regulators eased restrictions on foreign direct investment in multi-brand retail, encouraging growth in modern retail alongside India’s 8m traditional retailers.
Gathering pace
Shiva Mudgil, an analyst for Rabobank’s food and agribusiness research and advisory in India, said: “While it took Europe 50 years to achieve 28% market penetration of private food labels in retail, Rabobank expects India and China to reach the same level in just 15 to 20 years.”
Rabobank believes that modern food retailing in India will reach 15% market share by 2020, and achieve 26% by 2025. At the same time, it expects the private label market share in modern retail to be around 10.5% in 2020, and reach 25% by 2030.
“Currently, India’s modern retail market is relatively small, accounting for 6.5% of total food retail. But major national retailers such as Reliance Retail, Aditya Birla Retail and Bharti Retail, have private labels in food categories so we see significant growth potential,” added Mudgil.
“Today private labels in India’s modern food retailers account for about 4.5% across all categories. However in staples like rice and wheat flour, it can be as high as 30% to 50%, due to high price sensitivity and low brand recognition,” he said.
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