The Rise of Private Label Products in FMCG

Kirsten Farias, Managing Director of Hindocare India, in an interaction with Industry Outlook, discusses how rising economic pressures and expanding e-commerce have shifted consumer loyalty toward private label FMCG products. He explains how retailers leverage data analytics, flexible supply chains, quality controls, and targeted marketing to enhance competitiveness, sustainability, and growth, positioning private labels as key players in price-sensitive markets.

With modern trade and e-commerce channels expanding rapidly, how are private label FMCG products reshaping consumer loyalty and brand perception in price-sensitive segments?

Due to current economic conditions and inflation, consumers have become highly price-sensitive, weakening long-term brand loyalty and driving a shift toward local, new, and private-label brands. Due to the ease of launching private labels on e-commerce platforms, now there are hundreds of brands offering new and unique products which consumers would like to opt for and experiment with. Some big modern trade outlets enjoy consumer trust, which has been built over the years and passed on to the new private labels they promote; hence, a brand preference is built by this. Private labels offer more margins to modern trade and e-commerce companies and therefore enjoy more shelf space or visibility.

How are retailers using advanced consumer analytics to strategically position private labels against national brands in high-velocity product categories?

Retailers analyze the products a consumer purchases and at what frequency. Consumer data, such as geographical area, gender, age, and products, are studied by them. They analyze what products are replaced with national brands and identify substitutes accordingly. Using data, retailers reduce shelf space or visibility for underperforming national brands and prioritize the latter. Retailers offer private-label products by region or store type.

Retailers monitor competitor pricing for national brands online and in stores and thereby adjust private label pricing. In e-commerce, algorithms push private label alternatives to national brands when users search or browse products. Feedback from online reviews and social media is analyzed to identify national brand weaknesses and position private labels as better alternatives.

What sourcing or supply chain models are enabling faster go-to-market cycles for private label products, especially in food and personal care categories?

Retailers are collaborating with contract manufacturers and launching their own private labels in food and personal care categories. This gives them direct control over production timelines, quality and cost. Some retailers even invest in their own manufacturing setup. Retailers also opt for localized sourcing, especially for food products, as the shelf life of these products is low. There are various tools to analyze when the demand for a particular product spikes and vice versa, so the supplies can be planned accordingly.

How do private-label players ensure product consistency and quality control while maintaining aggressive price competitiveness across diverse markets?

Private-label players implement various quality management systems and standard operating procedures in their operations and strategic sourcing. Retailers also demand various certifications such as GMP, ISO and third-party audits from private label suppliers. Fewer, but more trusted suppliers are used globally to simplify quality oversight and increase bargaining power. Suppliers must pass rigorous vetting and onboarding processes, including sample testing, factory audits, and social compliance checks, before being contracted. Retailers work closely with specialized contract manufacturers (often also serving national brands) that already have strong quality systems in place.

In what ways are packaging design and targeted promotions influencing trial and repeat purchase behavior for private labels in cluttered retail environments?

Packaging design and targeted promotions help private labels stand out, convey trust and compete effectively with national brands. Nowadays, minimalistic designs, color coding, matte finishes, premium fonts and the use of eco-friendly materials are in trend for premium products. Transparency in ingredients with tag lines such as “sulphate/paraben free, sugar free” develops trust, especially in food and personal care categories. Offers such as buy one get one and cross-category bundling increase convenience. Functional packaging, such as easy-to-reseal pouches and pump dispensers, leads to repeat purchases.

How will evolving consumer preferences, retail consolidation, and D2C platforms accelerate the growth trajectory of private labels in the next five years?

The growth trajectory of private labels is set to accelerate exponentially over the next five years. Consumer preferences are shifting from brand-loyal to value-driven. Consumers increasingly trust the retailer more than the brand, especially when backed by data, reviews, and consistent in-store experiences. Consumers are showing more openness to “unknown” brands if they align with values and function. Retailers capture consumer data, enabling hyper-targeted private label development and personalization. Larger retailers can vertically integrate supply chains, allowing them to control cost and quality, making private labels more competitive. Retailers can test new private labels in limited geographies or niche segments via D2C without the cost of setting up physical stores, especially in the personal care categories. Private labels benefit from omnichannel strategies (e.g., buy online, pick up in store). Retailers and D2C platforms will eventually launch their own private labels in the next 5 years, as this space is getting very competitive as new players enter the market, so in order to sustain and be profitable, they will be forced to launch their own private labels.