Research Paper (Abstract) for ICBM 2008 International Conference on Brand Management November 21-22 2008, IMT Ghaziabad

AN ANALYSIS OF CONSUMERS BRAND PREFERENCE ON NATIONAL VS. STORE BRANDS

Authors: *Sonal Gupta Lecturer: School of Management, Swami Vivekanand College of Engineering Indore (M.P.) Affiliated to Devi Ahilya Vishwavidhyalaya, Indore 9302589082, 0731-2320032, sonalagrawal519@yahoo.com

**Dr. I.C. Gupta Director, Prestige Institute of Management and Research, Indore (M.P.) 9993575899, director@pimrindore.com

***Dr. R. K. Jain Professor, Marketing: Prestige institute of Management and Research, Indore (M.P.) 94259-10111, greetrk@gmail.com

ABSTRACT According to a Euromonitor study the global store brand market was estimated to be worth $1,411 billion in 2005 and is growing at 6% per annum. In a separate AcNielsen store brand study, two-thirds of the global consumers said they considered super market own or private label brands to be a good alternative to other brands, and supermarket own brands are usually extremely good value for money. Organized retail currently forms only about 3.59% of total retail in India but its share will leap to 28% by 2017, according to a study by Technopark says that overall store brands already form 19% of the total market share in India. As the organized retailing is growing in India store brands are capturing the market share from national brands. It is estimated that they are going to give a tough fight to store brands. Almost every organized retail player is carrying its store brand and trying to increase the number and the categories of store brands. Store brands provide value for money to customers and higher margin to retailers. It is a way to provide differentiation from one retailer to other by having store brands. Store brands have changed the dynamics between manufacturer and retailer. In this scenario it has become very essential to understand the category specific factors which affect the consumer preference for store brands versus National brands. This paper aims to investigate the consumers brand preference for National versus store brands in Food & Grocery category. Food and Grocery is taken for the analysis of consumer preference of store brands versus national brands in this study, as various store and National brands are present in this category. Key words: Store brands, National brands, Organized retailing

INTRODUCTION Global retail consultant KSA Technopark have estimated Indian retailing to be a US $ 200 billion industry of which organized retailing makes up 3% or US $ 6.4 billion. By 2010 organized retail is projected to reach US $ 23 billion that is about 9% of total retail sales. In developed markets of west store brands had accounted for nearly 13% of the supermarket sales in the US & nearly 20% of the supermarket sales in Canada during 1990-91.

In India too store brands started gaining share from the national brands. During the year 03, Big Bazaar of Pantaloon group had 25% of its sales coming from store brands and it earned 5% higher gross margin on them than other popular brands. The growth and development of retail brands has experienced considerable change over the last few years, Retailers offer quality product, design and packaging and use all the 4 Ps very effectively like the manufacturers brand. Consumer perception about the store brands has also changed from low quality products to premium brands There has been significant increase in private labels recent years worldwide. Store brands are growing faster than the manufacturers brands. It can no longer depend on the price advantage to fight branded products. It has improved on quality & offers a value proposition to the customers. Some store brands have been able to positioned themselves as premium brands Store brands offer the consumer greater value, while increasing the profitability of the category as a whole and giving greater bargaining power to retailers. Almost all large global retailers like Tesco, Sainsbury & Wal- Mart have their own store brands. They give better margin to retailers than selling brands from other manufacturers the retailers make the brand and price it below competitors. Since the stores are retailer owned, they can give the store brands ample display, saving on marketing & other intermediary costs. About 35-40% of the total merchandise at Reliance hypermarts is likely to be its own brands. Piramyd retail substantially increasing the share of store brands to enhance the margin of store brands contribute a larger share of the profit margin for the retailer with saving on transportation, marketing and advertising. Store brands are giving greater competitive threat to nation al brands. The aim of paper is to bring in light the growing importance of private labels. Very less amount of work has been done to understand this area. Though they are about to become a major threat for the manufacturers, they are comprising various advantages for the consumers. This paper will help in analyzing the factors which influence the consumer brand preference for national vs store brands.

OBJECTIVES 1. To investigate consumer brand preference for national versus store brands in Food & Grocery category 2. To study the influence of Quality, taste, price sensitivity, packaging on brand preference for national versus store brands in food & grocery category 3. To study the relationship of income, age, and gender between brand preference for national brands versus store brands

HYPOTHESIS H0: Quality, taste, price sensitivity and packaging factors have no influence on brand preference for national brands versus store brands in food & Grocery category H1: Quality, taste, price sensitivity and packaging factors influence brand preference for national brands versus store brands in food & Grocery category H0.1 There is no relationship between income level and brand preference for national versus store brands in food and grocery category. H1.1There is a relationship between income level and brand preference for national versus store brands in food and grocery category. H0.2 There is no relationship between age and brand preference for national versus store brands in food and grocery category. H1.2There is a relationship between age and brand preference for national versus store brands in food and grocery category H0.3 There is no relationship between gender and brand preference for national versus store brands in food and grocery category. H1.3There is a relationship between gender and brand preference for national versus store brands in food and grocery category.

LITERATURE REVIEW Ac Nielsen the Power of Private Label (2005) An insight into consumer attitudes, two thirds of global consumers consider supermarket own or private label brands to be a good alternative to other brands. The study was done in developed markets of Europe, the Pacific and North America. With a global average of 69% agreeing they were extremely good value for money, and 62% considering their quality to be at least as good as the big brands. Study reveals that the image and education the biggest challenges for retailers in developing markets. Ergin Akagan Elif (2007) Analysis of Consumers brand loyalty on National versus store brands Compare the influence of quality, price sensitivity and brand knowledge factors on brand loyalty for national versus store brands. The results reveal that the consumer s brand loyalty for national brands are quiet strong compared to store brands R.C. Natrajan, TAPMI analyzed the challenges and opportunities from own store brands, As per the analysis, private labeling occurs mainly in destination categories such as cereals & pulses in FMCG sector, it will not be long before the mega store move towards labeling other packaged products as well. Brand loyalty will face assault not only from other brands but also from store loyalty, aiding the growth of private labels. Such a growth of private labels offers challenges to the national brands in terms of the element of marketing strategy. It also provides the manufacturers of national brands the opportunity to 1. Move away from mass marketing to segment in specific market area 2. Utilize their production capacity better by tying up with the retail stores to pack their brands under the store labels. Store brand entry 1. Increases consumer choice in store 2. It makes the national brands to switch to just price and to avoid near monopoly pricing K. Suhir, and Debabrata Talukdar, (2004), developed two sets of measures of store patronage; to study does store brand patronage improve store patronage. Based on store revenues and store profits from a household and the other on share of store revenue and store profits due to a household. They found that revenue falls when store brand share increased, but profit rise under

sets of measures. They found that greater breadth of store brand purchases leads to greater revenue and profits. This conclude that store brand contribute to greater store differentiation rather than increased price sensitivity in the market.

METHODOLOGY The study is based on descriptive research design. Products like pulses, rice, ready to eat packaged food in the category of food & grocery were taken. Mall intercept interview were conducted to collect the data for the study by using questionnaire as the research instrument The sample of 100 respondents was taken from Indore. Customers from various retail chains like Reliance Fresh, Food Bazaar, Big Bazaar, Pakiza, Vishal Mega Mart & India Bulls Mart participated in the survey. Customers within the age group of 18-65 were involved in the study. Frequency Distribution of the variables was conducted to identify the profiles of the respondents

DATA COLLECTION AND ANALYSIS Data was analyzed by Multi linear Regression to test whether the quality, taste, price sensitivity and packaging factors have any influence on brand preference for national brands versus store brands in food & Grocery category. T-test was performed to test whether there is a relationship between age, gender, income level on brand preference for national versus store brands.

RESULTS AND IMPLICATIONS Analysis of data shows that customers have strong brand preference for national brands. Customers feel that quality, taste & packaging of national brands is better than the store brands while store brands are priced lower than the national brands. Table1.1: Consumers Demographic Profile (Income) Income (Rs.) Below 20,000 20,000 and above Age Below 30 yrs 30 and above Frequency 46 54 Frequency 56 44 Percent 46 54 Percent 56 44

Table1.2: Consumers Demographic Profile (Age)

Table1.3: Consumers Demographic Profile (Gender) Gender Male Female Frequency 50 50 Percent 50 50

Table2: Multi Linear Regression Analysis for brand Preference for National versus Store Brands
Coefficientsa Unstandardized Coefficients B Std. Error 15.041 1.597 1.192 .303 .913 .288 2.188 .321 .873 .298 Standardized Coefficients Beta .290 .218 .508 .203

Model 1

(Constant) QUALITY PRICE TASTE PACKAGIN

t 9.416 3.929 3.167 6.816 2.930

Sig. .000 .000 .002 .000 .004

a. Dependent Variable: BRANDPRE

Hypothesis H1 was tested to find out whether Quality, taste, price sensitivity and packaging factors have any influence on brand preference for national brands versus store brands in food & Grocery category. The testing of this hypothesis shows that factors like quality price taste and packaging influence the brand preference for national versus store brands. These four independent variables are able to explain 55.4% variation of the overall variation in brands preference for national versus store brands(R2=0.554, F= 29.423, p<0.01), this indicate that in addition to these variables preference. t-test was performed to test whether there is a relationship between Income, age, gender and brand preference for national versus store brands. S= (n1 12 + n2 2 2 ) & t= n1 + n2
x1 x2 1 1 S ( + ) n1 n2

there may also be other

factors

which influence the brand

H0.1 hypothesis was accepted as tcal=1.22< ttab=1.96, shows there is no relationship between income and brand preference for national versus store brands. H0.2 is also accepted as tcal=1.662<ttab=1.96, there is no relationship between Age and brand preference for national versus store brands. H0.3 is rejected as tcal=2.075>ttab=1.96., shows there is a relationship between gender and brand preference for national versus store brands. Table 3: t-test Analysis for relationship between income, age and gender for brand Preference for National versus Store Brands

x1
Income Age Gender 28.73 28.66 28.38

x2
29.96 30.34 30.42

1
4.914 5.210 4.927

2
5.043 4.590 4.903

S
4.984 4.95 4.915

tcal

1.223

1.662
2.078

Besides the factors discussed above other factors as reliability, hygienic, freshness and effect of advertisement also influence the brands preference for national versus store brands. As national brands spend heavily on advertisement they might influence the customer perception about the quality and the benefits of the product while store brands can not spend on advertisement as it would lead to increase average cost, so only those customers who visit the store can be influenced. Similarly reliability on National brands is higher than the store brands as the store brands has always been considered as low quality products though the perception has changed significantly but it will take some time in changing the overall perception.

LIMITATIONS AND SCOPE OF RESEARCH Private labels are setting their foot not only in Food & Grocery but in other categories as well. This research has limitation that it is carried out for the category of Food & Grocery only with small sample sizes. Similar kind of research with extended version can be conducted on larger sample sized with other categories. Brand preference for national versus store brands varies not only with the category but also products within the category. Various product specific researches could also be performed to have an in depth insight about the store brands. Factors for the study can also be further added for clearer picture. 8

BIBLIOGRAPHY 1. AcNielsen consumer attitudes towards private label global study(may, 2005). 2. Bolta Lakshmaiah, Private Labels An Introduction, ICFAI university press. 3. Broadbridge Adelina & Morgan Henry Consumer buying behavior of and perceptions towards Retail Brand Baby Products ISSN 02659778 4. Dhar Sanjay K., Hoch Stephen J. & Kumar Nanda(2001) Effective category management depends on the role of the category, Journal of Retailing Volume 77, Issue 2. 5. Elif Ergin Akagan (2007) Analysis of Consumers brand loyalty on National versus store brands, EABR (Business) & ETLC (Teaching)Conference Proceedings. 6. Floor K O, (2006) Branding a Store: How to Build Successful Retail Brands in a Changing Marketplace Amazon.com 7. Glynn Mark, Judy Motion and Brodie Rederick, paper 06-2003 Retailers perceived value of Manufacturers Brands, Research Paper Series Faculty of Business, ISSN No. 1176-1997 8. Ibarra Octavio Consuegra Own labels in the UK, a source of competitive advantage in retail business ISSN1657-6276 9. Johan Ameslmson, Ulf Johansson, Antonio Maranon, Niklas Persson Retailer brand Category penetration & effect on average prices. Lund International Food Studies 10. Kumar Nirmalya, Steenkamp, Jan-Benedict, (Published: 2/2007) Private Label Strategy: How to compete with Store Brands, Harvard Business School Press 11. Mark O Bornick (Jan. 1, 2003) the Future of private Label Food & Drink (Growth strategies for retailers& manufacturers, management Report published by Business Insight Ltd. 12. Natarajan R.C TAPMI Manipal, Challenges & Opportunities from our store brands. 13. Retail Management, ICFAI Centre for Management Research 14. Sennou Fabian Berges, Bontems Philippe and Requillart Vincent universite de Toulouse (INRA, IDEI),(June, 26-27, 2003), Economic impact of the development of private labels, Ist Biennal Conference of the Food System Research Group, University of Wiscinsin, Madison,

15. Serdar Sayman and Raju Jagmohan S. (Number 2 / March, 2004) Investigating the Cross-Category Effects of Store Brands Review of Industrial Organization Springer Netherlands Volume 24 129-141 16. Gajanan Shailendra, Suman Basaroy, Srinath Belblon (Number 3 / September, 2007) Category Management, Product Assortment & Consumer Welfare, Springer Netherlands Vol18. pp 135-148 17. Suhir K., and Talukdar Debabrata (2004), Does store brand patronage improve store patronage, Springer in its journal Review of Industrial Organization Vol.24,pp143-160 18. Reliance Mart bets on value, private labels to drive sales. 01 September, 2007 Business Line 19. www.brandchannel.com -http://www.brandchannel.com/features_effect.asp?pf_id=94 20. http://www.indiaretailbiz.com/blog/?s=private+labels Visited December15, 2007 21. www.plma.com/http://plma.com/showinfo/showinfo2008.html January 24th 2008 22. www.plmainternational.comhttp://www.plmainternational.com/en/private_label_en2.htm 23. www.retailyatra.com 24. www.rpggroup.com 25. http://retailindustry.about.com/library/uc/02/uc_stanley2.htm26. http://retailindustry.about.com/library/uc/02/uc_stanley4.htm 27. http://www.retailindustry.about.com/http://retailindustry.about.com/b/2005/06/14/private -labels-preferred.htm 28. www.shoppersstop.com

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