Trends: The rise of private labels

A large number of companies are nurturing brands in-house before taking them to the mass market

"Fabelle was conceived as a brand that would bring the finest chocolate experience in the world to Indian consumers," says G K Suresh, vice-president, new category development, ITC. Fabelle is a brand of chocolates that ITC launched in April last year but it is only now that the company is planning to set up chocolate stands and standalone stores. It is available at select ITC hotels across the country. The company is doing something similar with its newly launched premium coffee brand Sunbean, being sold at select properties.

ITC is not the only company raising a band of brands at home before setting them out in the world. Godrej Nature's Basket, Amazon, Flipkart and several fashion retailers are doing the same. These companies are doubling up as marketplaces for in-house brands instead of routing them through traditional distributor-retailer networks. This has several implications - for one, companies are deliberately restricting the reach of their brands, albeit for a brief interim period. This is similar to what online brands do; build a small band of loyalists and then rely on their social media networks to grow. With Fabelle, for instance, ITC is not rushing into the Rs 7,000-crore chocolate market growing at around 10-12 per cent. It is also looking at digital marketing to spread the word. It has a range of handcrafted boxed chocolates priced between Rs 475-600 at special chocolate boutiques in its hotels. In addition, the boutiques offer desserts and beverages created with Fabelle.

The company invested in over 1,000 man-hours of training to ensure that the chocolates and desserts were presented in the right manner. Today, around 30 per cent are repeat customers, said Suresh. He believes that premium consumers are moving from passive luxury to active luxury. The customer wants to engage with the brand and looks for an experience with the purchase.

However, luxury is not the exclusive domain of private labels, e-commerce companies such as Amazon and Flipkart are raising their own armies too. Myntra has Roadster, Mast and Harbour - all fast selling fashion brands. Amazon wants to launch its fashion label Symbol before the festive season this year.

The emergence of private labels is changing the way brands are built as companies (not the e-commerce platforms of course) are sidestepping regular distribution networks to ply their trade. And this could eventually change relationships. For example, ITC's ties with the distributor-retail network for its snacks segment will always be very different from the ones it forges with the chocolate selling community.

Another change that brands may have to contend with in the coming years is the possibility that online marketplaces may push their own brands more aggressively than outsider brands. The conflict that could ensue would make for interesting battles. Until then however, get ready for the rising power of private labels.