Executive Interviews: Interview with Nirmalya Kumar on Private Labels
April 2008 - By Dr. Nagendra V Chowdary

Nirmalya Kumar
Professor of marketing,
Faculty Director for Executive Education,
Director of Centre for Marketing,
Co-Director of Aditya Birla India Centre at London Business School.

wasn't really much on how to compete against private labels and no books existed on this subject. So after having done this for 5 to 7 years, I decided towrite a book on this subject. One of my friends also faced the same problem, with other companies, so we put in our thoughts for 15 years, and came with my first book on private labels. We saw the market there, which is something related to our expertise, we developed material and that is how this project started.

• In the initial pages of this book you get to see that it is (private label) more of a phenomenon that is taking place throughout theUS. Is that true?
  That is true. Private label is not about developed or developing world. Private label share is based on the retail consolidation in the country. If a country has high retail consolidation then you have a high private label share. If a country has a low retail consolidation then you have low private label share.

• Is it also correlated with the economic conditions of a country?
  No. America is a one of the sophisticated markets in the world, but then private label share is much lower than the other European countries because the retail consolidation is much higher.

• If you go back and trace the history, what point of time you think you would have seen the maximum growth of private labels?
  In every country the fastest growth rate happened wherever faster retail consolidation has taken place.

• When you look at this growth of private label brands vis-à-vis the manufacturing brands, in which category do you find most of them?
  More functional the category is, like toilet paper, paper towels, paper glasses, etc., in those categories you find great penetration of the Private Labels. The more difficult categories for private labels to penetrate are the ones which add more symbolic and emotional component to the consumption, health and beauty products for example. Beauty products are a very good example where private labels have not contacted success.

  The initial private label offer had always been, we are the same quality but cheaper. Now where the quality had been pretty much objective, where the quality is one the customer is not that interested in a quality beyond a certain minimum, private labels took the shelf.

• Is it right to assume that industries that are likely to get commoditized have private labels?
  The companies that are competing on the functional characteristics is where you find more private labels. But having said that, private label share is growing fastest in those categories where the share is the lowest. So, beauty products for example is one of the fastest growing private labels because retailers have become more sophisticated. Now, they have realized that putting their own brand name on beauty products doesn'twork, because people expect some symbolic consumption. So they create for example in shampoo, a line called Herbal Essences, it is a private label owned by a company. The retailers become more sophisticated and know how to tackle the symbolic consumption. They don't use their own brand names but they use vague brand names.

• We get to see private labels in products in the last 30-40 years or so. Do you foresee these kinds of things happening in service as well?
  In services when you say private label, it has to be seen in a different way. For example, all credit cards issued by most people are private label credit card issued by a bank, with the name of the retailer in front, that's a private label. Expedia is running websites of many airline companies, that's a private label.

1. Private Labels Case Study
2. ICMR Case Collection
3. Case Study Volumes