Description
This is document explaining on the emergence of private labels.
Emergence of Private Labels
Business Research Methods
Submitted to Dr. XXXXXXXXXXX
Group 2: XXXXXXXXXXXX
Emergence of Private Labels 2008
TABLE OF CONTENTS
Page No. 1. Introduction…………………………………………………………………………….3 2. Background…………………………………………………………………………….3 3. Research Objective……………………………………………………………….....…3 4. Methodology………………………………………………………………….……..…4 a. Sampling Design……………………………………………………….………4 b. Data Collection…………………………………………………………...……5 c. Data Analysis……………………………………………………………..……9 5. Findings…………………………………………………………………………….…12 6. Conclusion………………………………………………………………………….…16
2|Page
Emergence of Private Labels 2008
INTRODUCTION The research aims to the emergence of private labels across different segments in the Indian Retail sector. BACKGROUND Store brands or private label brands are brands owned, controlled, and sold exclusively by a retailer. Private label brands which were first introduced over 100 years ago in few product categories, had seen an impressive growth in past few decades. Private labels proliferated in a number of product categories and garnered major market share as retailers perceived numerous benefits by their introduction. Apart from providing higher retail margins in comparison to national brands, private labels added diversity to the product line in a retail category. Added benefits accrued to the retailer in terms of differentiating its offerings from competing retailers as well as having greater leverage with manufacturers of national brands. Research on private label brands has been of substantial interest to the marketing managers and academicians. One stream of research in this area deals with the factors associated with private label brands adoption. Ever since R. M. Cunningham (1961) came up with his seminal article in which he addressed the issues of loyalty to brand or a particular store, researchers have tried to uncover stable person characteristics related to private label brands. Organised retail is on the threshold of a boom in India. But as companies line up to grab a bigger and bigger slice of the retail pie, another battle is likely to change the face of the industry -- the one between the manufacturer brands and the retail chains’ private label brands, which are far from being just cheap generics. Worldwide experience shows that as retailers become more powerful, they have increasingly focused on their own brands at the expense of manufacturer brands. RESEARCH OBJECTIVE ? One of main objective of the Research is to find out the popularity of the Private labels among the consumers.
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Emergence of Private Labels 2008
? ? Another objective is to find out the future of private labels in the context of India. Can private brands ever generate the type of consumer loyalty some of the iconic manufacturer brands such as Marlboro and Coca-Cola have?
METHODOLOGY The methodology explains the Sampling design that we have adopted. It is followed with the data collection and analysis. 1) Sampling Design Sample: To study private labels in different stores the research sample was divided into three different sets: 1. Managers of stores that consist of a mix of normal brands and private labels ? ? ? ? ? Lifestyle Shoppers Stop Pantaloons Big Bazaar Globus
2. Managers of stores that consist mainly private labels ? Westside
3. Customers frequenting different types of stores and using private brands
Purpose of Sampling: To draw conclusions about populations from samples, we must use inferential statistics which enables us to determine a population’s characteristics by directly observing only a portion (or sample) of the population. We obtain a sample rather than a complete enumeration (a census) of the population for many reasons. Also, it is cheaper to observe a part rather than the whole, but we should prepare ourselves to cope with the dangers of using samples.
4|Page
Emergence of Private Labels 2008
Sampling Frame: Store managers were interviewed personally and online questionnaire was also circulated. Sampling Technique Used: Judgemental Sample Size: 25
2) Data Collection We have used questionnaire survey and interviews for data collection. Two separate questionnaires were used for store managers and for customers of private labels. For the customers, the questionnaire starts with explaining the concept of private labels and asking if has used them or not. They are then asked about factors like quality of private labels with respect to normal brands, motivation factors to buy private labels etc.
5|Page
Emergence of Private Labels 2008
A snapshot of our Questionnaire is as follows:
6|Page
Emergence of Private Labels 2008
The retail store managers were interviewed personally and a questionnaire was filled by them. It was ensured that our sample was mix of pan of branded as well as local operators. We have tried to ask them about their internal capacities and effect of these factors on their organization.
7|Page
Emergence of Private Labels 2008
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Emergence of Private Labels 2008
3) Data Analysis a) Retailing in India: Retailing in India is still very primitive. At the moment, private labels are meager in the country. They are less than 5 per cent of the retail business and still have a long way to go. However, Indian retail is growing and offers a proposition that can’t be seen anywhere else in the world. b) Evolution of private labels: Private labels have come a long way over the last three decades. They started with retailers wanting to offer cheaper substitutes. This was for two reasons. One, having a private label meant that retailers could negotiate a better
9|Page
Emergence of Private Labels 2008
margin from the manufacturer. And the other, when they had private labels they had a differentiator. c) Growth of Private Labels: The biggest change in the last decade or so has been the entry of premium private labels. By offering high quality products, many private labels have started charging more than regular manufacturers. They advertise on television, take up brand-building exercises, and most importantly, they focus on developing a better product than the existing manufacturers’ brands. This can be confirmed by the data offered by ‘India Brand Equity Foundation’ and can also be verified by the survey that we have received by store managers. d) Indian Scenario: The share of private labels in any country depends on how consolidated the retail chains are. Developing a good quality brand has a high development and innovation cost attached to it. To be able to absorb such costs, Indian retail chains will need to scale up. a. Composition of Private labels in Retail Stores: Depending on the retailing major's strategy, in-store brands already account for about 10 per cent to 80 per cent of sales for different Indian retailing firms. Pantaloons: Private label contribution in the Pantaloon departmental stores is currently over 70 per cent In Big Bazaar, private labels have just been launched in the apparel segment (five labels have been launched over the past three months and three more are expected to be launched in the next month). Private labels are expected to contribute more than 50 per cent in their respective categories. At LifeStyle, one can find a healthy mix of popular brands and private labels. The private labels currently contribute 10 per cent of the total business. After expanding, it is believed that private labels can contribute 20 per cent in the long run. Shoppers' Stop too has seen the share of private labels rise to 18 per cent. The retail chain has brands such as Life, Stop, Kashish and Vittorio Fratini in its portfolio and recently launched two more. While the chain is growing at about 35
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Emergence of Private Labels 2008
per cent per annum, the private labels at the store have been growing at about 4045 per cent. At present, while approximately 80 per cent of its sales come from outside brands and the balance from private labels, the chain is targeting to change this ratio to 70:30. Globus: Recently, Globus Stores Pvt Ltd decided to become a single store label brand under its own name. Discontinuing its previous formats, Globus will now launch smaller stores under its private label. At present, 90 per cent of the merchandise is under the Globus brand but with time they plan to convert the balance into a private label brand. Westside (which is owned by Trent Ltd) follows a somewhat different model, stocking a very small percentage of outside labels. At present, about 90 per cent of the chain's sales come from its 15 private labels, which includes labels like 2 F 4 U, SRC, Gia, Urban angel, Intima, David jones and Ascot. b. Reasons for increasing Private Labels in Retail Stores i. There are gaps in the Indian market which the existing brands do not fill. For example, in women's ethnic wear, a private label could have clothing for plus sizes. ii. As organized retail evolves, the retailers will gain economy of scale to get into private label production. iii. The private label gives the retailers the opportunity to differentiate, and retailers will capitalize on this advantage as they continue to grow. iv. The private label offers a better deal to the consumer. The Indian consumer is seeking value for consumer products. Westside, which predominantly stocks its own labels, believes that its strategy gives the company the flexibility to create a range of products as per the requirement of the customer, that is, based on the customer profile. e) Precaution for retailers: They must make sure that they don’t over exercise the private label option. If they fall into the trap of using too many private labels, they
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Emergence of Private Labels 2008
will end up losing customers. It has been seen that when retail chains rely heavily on private labels, customers feel they lack choices. Many retailers have suffered due to this and their sales dropped significantly after introducing too many private labels. f) Action to be taken by manufacturers: They need to keep coming up with new products and new value additions continuously. By doing this, they ensure that they are a moving target and not a sitting duck. There have been examples where manufacturers have innovated and upgraded their products regularly, the share of private labels has been low. g) Future of private labels: Private retailers should occupy only about 50 per cent of the market. At 50 per cent, they begin to saturate. If they try to occupy more than this, then consumers feel that there aren’t enough choices.
FINDINGS
Private labels are quite popular amongst the consumers and this is a good signal for the Indian retailers. Amongst the 25 respondents interviewed, 23 or 92% were the users of private labels.
Users of Private Labels
No 8% Yes 92%
Traditionally the perception about the private labelled apparels is that they are value for money but when it comes to quality, they definitely score below the branded apparels. But, now private labelled apparels in India have caught up with the branded items in this aspect. 12% of the
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Emergence of Private Labels 2008
people had extreme views about the quality of private labels with respect to brands, but 24% people said that the quality was good. The highest, 32% were neutral and found private labels matching in quality with the brands.
Quality of Private Labels as compared to Branded Apparels
32% 24% 12% 20% 12%
Excellent
Good
Neutral
Fair
Poor
The popularity and future course of private labels in the Indian retail sector can also be analysed with the value that the customers derive from them. As shown in the graph below, private labelled apparels being value for money goods has been ranked as the number one motivating factor by 32 % people which is the highest. Thus most people perceive the private labelled apparels as value for money items. The next most important motivating factor is quality, 24% people felt that, it was the quality of private labelled apparels that attracted them. The reliability of the retailer has been the next most valued factor, this points at two conclusions, firstly the customers can associate the private label with the retailer and the brand of the retailer plays an important role in attracting the customers to buy private labels. The factors like variety and quality of the apparels are uniformly appealing to the people, variety has been ranked as the second most preferred motivating factor. This indicates that the variety of apparels available at Pantaloons and Lifestyle etc. has an important influence in attracting customers.
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Emergence of Private Labels 2008 Motivators to buy Private Labels
Ranks(Order of Preference) 5 4 3 2 1 0% 8% 16% 12% 20% 24% 20% 16% 32% 12% 24% 24% 24% 20% 28% 24% 50% Number of Respondents 44% 28% 20% 12% Value for money 16% Quality Variety Reliability of the retailer Ease of availability 12% 20% 20% 8% 100%
16%
The ease of availability of the retail store is found to be one of the least motivating factor while taking a decision to buy private labelled clothes. The future prospects and popularity of private labels in the segments other than apparels was found to consist of a popularity of private labels in the food and accessories segment. The respondents were catagorized into regular buyers, planning to buy and those who did not have any such plans. 64% respondents were regular buyers of private labels in the food segment, this is evident from the observation that many people buy their groceries from retail stores which have a good mix of private labels and branded items. The next most preferred segment is the accessories segment where 60% of the respondents were regular buyers where as 36% were planning to buy. In terms of future potential, consumer durables is the most coveted segment, 36% of the respondents were planning to buy private labelled consumer durables but the number of people who have no plans to buy private labels was also the highest at 40%.
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Emergence of Private Labels 2008
Preference for Private labels in different segments
4% 36%
12% 24%
40% 68% 36% 24% 12% 20% No such plans Plan to Buy Regular Buyer
60%
64%
The future of private labels in the Indian retail sector will depend on a number of factors and one of the most important factors is opinion of the consumers regarding the future of the private labels.
Future Prospects of Private Labels
44%
24% 16% 8% 8%
Future Prospects of Private Labels
Excellent
Good
Neutral
Fair
Poor
Out of 25 respondents 44% said that the future prospects of the private labels in Indian retail sector will be good where as 24% thought that the future of private labels will be excellent
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Emergence of Private Labels 2008
according to the table above. Only 8% of the respondents felt that private labels will have a poor prospects in the future. Thus, we can conclude that private labels are quite popular among the consumers.
CONCLUSION Organized retailing in India is still in its growth phase and private labels, though being popular had the tag of being value for money, low cost items. But the research suggests that Private labels in the apparels sector are popular amongst the consumers not only because they are relatively cheap, but they also have a good mix of quality and variety. Thus, the future of private labels and the competition between the private labels and brands in Indian retail sector will be both on the fronts of quality and value in terms of money and we might see private labels becoming as popular as the big brands with sales in retail outlets other than their own. Overall, it is going to be a feverish competition amongst the private labels and the brands leading to more choices and improved products for the consumers.
16 | P a g e
doc_933622378.docx
This is document explaining on the emergence of private labels.
Emergence of Private Labels
Business Research Methods
Submitted to Dr. XXXXXXXXXXX
Group 2: XXXXXXXXXXXX
Emergence of Private Labels 2008
TABLE OF CONTENTS
Page No. 1. Introduction…………………………………………………………………………….3 2. Background…………………………………………………………………………….3 3. Research Objective……………………………………………………………….....…3 4. Methodology………………………………………………………………….……..…4 a. Sampling Design……………………………………………………….………4 b. Data Collection…………………………………………………………...……5 c. Data Analysis……………………………………………………………..……9 5. Findings…………………………………………………………………………….…12 6. Conclusion………………………………………………………………………….…16
2|Page
Emergence of Private Labels 2008
INTRODUCTION The research aims to the emergence of private labels across different segments in the Indian Retail sector. BACKGROUND Store brands or private label brands are brands owned, controlled, and sold exclusively by a retailer. Private label brands which were first introduced over 100 years ago in few product categories, had seen an impressive growth in past few decades. Private labels proliferated in a number of product categories and garnered major market share as retailers perceived numerous benefits by their introduction. Apart from providing higher retail margins in comparison to national brands, private labels added diversity to the product line in a retail category. Added benefits accrued to the retailer in terms of differentiating its offerings from competing retailers as well as having greater leverage with manufacturers of national brands. Research on private label brands has been of substantial interest to the marketing managers and academicians. One stream of research in this area deals with the factors associated with private label brands adoption. Ever since R. M. Cunningham (1961) came up with his seminal article in which he addressed the issues of loyalty to brand or a particular store, researchers have tried to uncover stable person characteristics related to private label brands. Organised retail is on the threshold of a boom in India. But as companies line up to grab a bigger and bigger slice of the retail pie, another battle is likely to change the face of the industry -- the one between the manufacturer brands and the retail chains’ private label brands, which are far from being just cheap generics. Worldwide experience shows that as retailers become more powerful, they have increasingly focused on their own brands at the expense of manufacturer brands. RESEARCH OBJECTIVE ? One of main objective of the Research is to find out the popularity of the Private labels among the consumers.
3|Page
Emergence of Private Labels 2008
? ? Another objective is to find out the future of private labels in the context of India. Can private brands ever generate the type of consumer loyalty some of the iconic manufacturer brands such as Marlboro and Coca-Cola have?
METHODOLOGY The methodology explains the Sampling design that we have adopted. It is followed with the data collection and analysis. 1) Sampling Design Sample: To study private labels in different stores the research sample was divided into three different sets: 1. Managers of stores that consist of a mix of normal brands and private labels ? ? ? ? ? Lifestyle Shoppers Stop Pantaloons Big Bazaar Globus
2. Managers of stores that consist mainly private labels ? Westside
3. Customers frequenting different types of stores and using private brands
Purpose of Sampling: To draw conclusions about populations from samples, we must use inferential statistics which enables us to determine a population’s characteristics by directly observing only a portion (or sample) of the population. We obtain a sample rather than a complete enumeration (a census) of the population for many reasons. Also, it is cheaper to observe a part rather than the whole, but we should prepare ourselves to cope with the dangers of using samples.
4|Page
Emergence of Private Labels 2008
Sampling Frame: Store managers were interviewed personally and online questionnaire was also circulated. Sampling Technique Used: Judgemental Sample Size: 25
2) Data Collection We have used questionnaire survey and interviews for data collection. Two separate questionnaires were used for store managers and for customers of private labels. For the customers, the questionnaire starts with explaining the concept of private labels and asking if has used them or not. They are then asked about factors like quality of private labels with respect to normal brands, motivation factors to buy private labels etc.
5|Page
Emergence of Private Labels 2008
A snapshot of our Questionnaire is as follows:
6|Page
Emergence of Private Labels 2008
The retail store managers were interviewed personally and a questionnaire was filled by them. It was ensured that our sample was mix of pan of branded as well as local operators. We have tried to ask them about their internal capacities and effect of these factors on their organization.
7|Page
Emergence of Private Labels 2008
8|Page
Emergence of Private Labels 2008
3) Data Analysis a) Retailing in India: Retailing in India is still very primitive. At the moment, private labels are meager in the country. They are less than 5 per cent of the retail business and still have a long way to go. However, Indian retail is growing and offers a proposition that can’t be seen anywhere else in the world. b) Evolution of private labels: Private labels have come a long way over the last three decades. They started with retailers wanting to offer cheaper substitutes. This was for two reasons. One, having a private label meant that retailers could negotiate a better
9|Page
Emergence of Private Labels 2008
margin from the manufacturer. And the other, when they had private labels they had a differentiator. c) Growth of Private Labels: The biggest change in the last decade or so has been the entry of premium private labels. By offering high quality products, many private labels have started charging more than regular manufacturers. They advertise on television, take up brand-building exercises, and most importantly, they focus on developing a better product than the existing manufacturers’ brands. This can be confirmed by the data offered by ‘India Brand Equity Foundation’ and can also be verified by the survey that we have received by store managers. d) Indian Scenario: The share of private labels in any country depends on how consolidated the retail chains are. Developing a good quality brand has a high development and innovation cost attached to it. To be able to absorb such costs, Indian retail chains will need to scale up. a. Composition of Private labels in Retail Stores: Depending on the retailing major's strategy, in-store brands already account for about 10 per cent to 80 per cent of sales for different Indian retailing firms. Pantaloons: Private label contribution in the Pantaloon departmental stores is currently over 70 per cent In Big Bazaar, private labels have just been launched in the apparel segment (five labels have been launched over the past three months and three more are expected to be launched in the next month). Private labels are expected to contribute more than 50 per cent in their respective categories. At LifeStyle, one can find a healthy mix of popular brands and private labels. The private labels currently contribute 10 per cent of the total business. After expanding, it is believed that private labels can contribute 20 per cent in the long run. Shoppers' Stop too has seen the share of private labels rise to 18 per cent. The retail chain has brands such as Life, Stop, Kashish and Vittorio Fratini in its portfolio and recently launched two more. While the chain is growing at about 35
10 | P a g e
Emergence of Private Labels 2008
per cent per annum, the private labels at the store have been growing at about 4045 per cent. At present, while approximately 80 per cent of its sales come from outside brands and the balance from private labels, the chain is targeting to change this ratio to 70:30. Globus: Recently, Globus Stores Pvt Ltd decided to become a single store label brand under its own name. Discontinuing its previous formats, Globus will now launch smaller stores under its private label. At present, 90 per cent of the merchandise is under the Globus brand but with time they plan to convert the balance into a private label brand. Westside (which is owned by Trent Ltd) follows a somewhat different model, stocking a very small percentage of outside labels. At present, about 90 per cent of the chain's sales come from its 15 private labels, which includes labels like 2 F 4 U, SRC, Gia, Urban angel, Intima, David jones and Ascot. b. Reasons for increasing Private Labels in Retail Stores i. There are gaps in the Indian market which the existing brands do not fill. For example, in women's ethnic wear, a private label could have clothing for plus sizes. ii. As organized retail evolves, the retailers will gain economy of scale to get into private label production. iii. The private label gives the retailers the opportunity to differentiate, and retailers will capitalize on this advantage as they continue to grow. iv. The private label offers a better deal to the consumer. The Indian consumer is seeking value for consumer products. Westside, which predominantly stocks its own labels, believes that its strategy gives the company the flexibility to create a range of products as per the requirement of the customer, that is, based on the customer profile. e) Precaution for retailers: They must make sure that they don’t over exercise the private label option. If they fall into the trap of using too many private labels, they
11 | P a g e
Emergence of Private Labels 2008
will end up losing customers. It has been seen that when retail chains rely heavily on private labels, customers feel they lack choices. Many retailers have suffered due to this and their sales dropped significantly after introducing too many private labels. f) Action to be taken by manufacturers: They need to keep coming up with new products and new value additions continuously. By doing this, they ensure that they are a moving target and not a sitting duck. There have been examples where manufacturers have innovated and upgraded their products regularly, the share of private labels has been low. g) Future of private labels: Private retailers should occupy only about 50 per cent of the market. At 50 per cent, they begin to saturate. If they try to occupy more than this, then consumers feel that there aren’t enough choices.
FINDINGS
Private labels are quite popular amongst the consumers and this is a good signal for the Indian retailers. Amongst the 25 respondents interviewed, 23 or 92% were the users of private labels.
Users of Private Labels
No 8% Yes 92%
Traditionally the perception about the private labelled apparels is that they are value for money but when it comes to quality, they definitely score below the branded apparels. But, now private labelled apparels in India have caught up with the branded items in this aspect. 12% of the
12 | P a g e
Emergence of Private Labels 2008
people had extreme views about the quality of private labels with respect to brands, but 24% people said that the quality was good. The highest, 32% were neutral and found private labels matching in quality with the brands.
Quality of Private Labels as compared to Branded Apparels
32% 24% 12% 20% 12%
Excellent
Good
Neutral
Fair
Poor
The popularity and future course of private labels in the Indian retail sector can also be analysed with the value that the customers derive from them. As shown in the graph below, private labelled apparels being value for money goods has been ranked as the number one motivating factor by 32 % people which is the highest. Thus most people perceive the private labelled apparels as value for money items. The next most important motivating factor is quality, 24% people felt that, it was the quality of private labelled apparels that attracted them. The reliability of the retailer has been the next most valued factor, this points at two conclusions, firstly the customers can associate the private label with the retailer and the brand of the retailer plays an important role in attracting the customers to buy private labels. The factors like variety and quality of the apparels are uniformly appealing to the people, variety has been ranked as the second most preferred motivating factor. This indicates that the variety of apparels available at Pantaloons and Lifestyle etc. has an important influence in attracting customers.
13 | P a g e
Emergence of Private Labels 2008 Motivators to buy Private Labels
Ranks(Order of Preference) 5 4 3 2 1 0% 8% 16% 12% 20% 24% 20% 16% 32% 12% 24% 24% 24% 20% 28% 24% 50% Number of Respondents 44% 28% 20% 12% Value for money 16% Quality Variety Reliability of the retailer Ease of availability 12% 20% 20% 8% 100%
16%
The ease of availability of the retail store is found to be one of the least motivating factor while taking a decision to buy private labelled clothes. The future prospects and popularity of private labels in the segments other than apparels was found to consist of a popularity of private labels in the food and accessories segment. The respondents were catagorized into regular buyers, planning to buy and those who did not have any such plans. 64% respondents were regular buyers of private labels in the food segment, this is evident from the observation that many people buy their groceries from retail stores which have a good mix of private labels and branded items. The next most preferred segment is the accessories segment where 60% of the respondents were regular buyers where as 36% were planning to buy. In terms of future potential, consumer durables is the most coveted segment, 36% of the respondents were planning to buy private labelled consumer durables but the number of people who have no plans to buy private labels was also the highest at 40%.
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Emergence of Private Labels 2008
Preference for Private labels in different segments
4% 36%
12% 24%
40% 68% 36% 24% 12% 20% No such plans Plan to Buy Regular Buyer
60%
64%
The future of private labels in the Indian retail sector will depend on a number of factors and one of the most important factors is opinion of the consumers regarding the future of the private labels.
Future Prospects of Private Labels
44%
24% 16% 8% 8%
Future Prospects of Private Labels
Excellent
Good
Neutral
Fair
Poor
Out of 25 respondents 44% said that the future prospects of the private labels in Indian retail sector will be good where as 24% thought that the future of private labels will be excellent
15 | P a g e
Emergence of Private Labels 2008
according to the table above. Only 8% of the respondents felt that private labels will have a poor prospects in the future. Thus, we can conclude that private labels are quite popular among the consumers.
CONCLUSION Organized retailing in India is still in its growth phase and private labels, though being popular had the tag of being value for money, low cost items. But the research suggests that Private labels in the apparels sector are popular amongst the consumers not only because they are relatively cheap, but they also have a good mix of quality and variety. Thus, the future of private labels and the competition between the private labels and brands in Indian retail sector will be both on the fronts of quality and value in terms of money and we might see private labels becoming as popular as the big brands with sales in retail outlets other than their own. Overall, it is going to be a feverish competition amongst the private labels and the brands leading to more choices and improved products for the consumers.
16 | P a g e
doc_933622378.docx