Bengaluru: Online grocer BigBasket plans to expand its private label offerings to non-food categories and offer more items under its existing private brands over the next three months, a move that is likely to help the company widen its lead over rivals.
Private labels are brands owned by retailers. They are typically more profitable than dealing in other brands. In the case of groceries, the margins could go as high as 30-40%, at least double those on other brands.
BigBasket will start selling a private brand for wet wipes, disposable bags and buckets among other items. It will also sell new food products such as noodles and papadams under its private brand Tasties and honey, cereals and flavoured tea under Royal, said co-founder and chief executive Hari Menon.
Earlier this month, BigBasket launched Lindberg, a private brand for chocolates.
BigBasket, run by Supermarket Grocery Supplies Pvt. Ltd, is the best funded home-grown online grocer with $220 million in funds from investors including Abraaj Group, Bessemer Venture Partners, Sands Capital and International Finance Corp.
It owns brands such as Fresho for vegetables, fruits, meat, and bakery products; Royal for staples, tea and cereals; Tasties for snacks; Fresho Signature for cookies, dehydrated fruits and exotic bakery range such as croissants and paninis; and HappyChef for gourmet products such as marmalade, pasta sauces, salad dressings and ready-to-eat products.
According to Menon, private labels will account for about 45% of the company’s revenue by March next year as against about 33% currently. BigBasket aims to clock revenue of Rs1,800-2,000 crore in FY17.
While there are no significant brands in categories such as staples and vegetables, BigBasket’s other private label products in cookies, bread, tea, chocolates, dosa and idli batter face stiff competition from established companies such as Britannia Industries Pvt. Ltd, Hindustan Unilever Ltd, Nestle India Ltd, ITC Ltd, and Mondelez India Foods Pvt. Ltd.
“As long as our product is priced competitively and below the leading brand, we will be able to drive it well with the customers. Today, despite having a lot of breads, our (private brand) bread accounts for about 45% of the breads sold on BigBasket. Within BigBasket, these brands will gain a significant share,” said Menon.
Not everybody agrees with that view.
“In the packaged foods space, retailers look at categories where there is a possibility for value play, i.e, when consumers are looking for a better price. A category where propensity for value play is not as high, and there are other factors such as taste, nutrition, etc., is not usually chosen by retailers to start with,” said Ankur Bisen, senior vice-president, retail and consumer products at consulting firm Technopak.
“Premium categories such as chocolates, cereals, etc., are a forte of established brands where consumers may seek something beyond price and may not make a shift to private labels,” he added.
BigBasket is tapping hotels, restaurants, caterers and hospitals for its private-label offerings.
Besides, the company sells its private labels to about 1,800 neighbourhood brick-and-mortar stores.
ALSO READ | Bigbasket: Delivering the goods
“We are not a fast-moving consumer goods company yet. Eventually we will be, but that is far away. Distribution is a different ball game. But, once we have a good range, nothing stops us from selling to other retailers,” Menon said.
He, however, maintained that though private labels offer better margins, BigBasket will not veer away from aggregating products from other brands, since it will curtail choices for consumers.
BigBasket’s nearest competitor, Tiger Global Management and SoftBank-backed grocery delivery start-up Grofers India Pvt. Ltd also launched its private labels—Freshbury for fruits and vegetables and Best Value for staples—earlier this year, Mint reported about that development on 15 September.