New Delhi: Several global companies from whom Wal-Mart Stores Inc., the world’s biggest retailer, sources consumer goods for its private labels business are seeking an entry into India to profit from the growing importance of organized retailing in one of the world’s fastest growing economies.
“We have a lot of international private label suppliers who are interested in setting up shop in India to create private labels, not just for Bharti Retail and Bharti-Walmart stores, but for the entire industry. We are working on those suppliers to come to India,” a spokesperson for Bharti-Walmart Pvt. Ltd told Mint in an email interview.
Bharti-Walmart is a 50:50 joint venture between the US retailing powerhouse and Bharti Enterprises Ltd.
Brand value: A file photo of Bharti-Walmart’s Best Price Modern Wholesale outlet in Amritsar. The firm has already launched eight of Wal-Mart’s private labels in India, including the Great Value brand. Ramesh Pathania/Mint
The spokesperson declined to name the companies interested in coming to India or the kind of opportunities they were exploring.
Bharti-Walmart has already introduced eight of Wal-Mart’s private labels in India, which it sells at the company’s sole wholesale retail outlet in Amritsar and at about six dozen Easy Day stores owned by Bharti Retail Ltd, which directly cater to retail customers. The private labels on offer in India include the popular Great Value brand, which offers tea, local snacks, ketchup, dish-washing bars, and toilet and glass cleaners.
Private labels are brands owned by large retailers that can be sold at lower prices without harming profit margins because they do not entail large marketing and advertising costs. Most large retailers in India such as Pantaloon Retail (India) Ltd, Aditya Birla Retail Ltd, Spencer’s Retail Ltd and Reliance Retail Ltd are pushing private labels to capture a larger share of consumer spending in their stores.
Smart sourcing is one of the key factors in retailing success—and Wal-Mart is widely regarded to have one of the best-oiled supply chains in the world, with 61,000 suppliers in 50 countries, including India.
The suppliers to the world’s largest retailer by sales aren’t small either. For instance, its cereal and snacks private label supplier Ralcorp Holding Inc. has an annual revenue of around $3.9 billion (around Rs17,980 crore). New York Stock Exchange-listed Cott Corp., which supplies private label beverages to Wal-Mart and other retailers, including Britain’s Tesco Plc. and Germany’s Metro AG, has annual revenue of $1.7 billion.
Other global suppliers to Wal-Mart include billion-dollar companies such as baby food maker PBM Products Llc, and pickles and soup supplier TreeHouse Foods Inc.
“As a global sourcing organization, we are always looking for emerging opportunities to get the best products for our customers, on an ongoing basis,” the spokesperson said.
India allows fully owned foreign subsidiaries in most of the manufacturing businesses unless they operate in sectors reserved for small-scale industries, such as pickles, mustard oil, wax candles and safety matches, among others.
“It’s natural for these companies to come here and it’s natural for Wal-Mart to bring people it is already familiar with and who understand its needs,” said Jayant Kochar, managing director of New Delhi-based retail consultancy firm Go Fish Retail Solutions.
Kochar said the arrival of such vendors would be good for the Indian economy as they would source most of their raw materials from within the country and generate employment.
“Indian market is huge and there is option for everyone. If good companies with proven expertise come in, they raise the bar and they improve standards,” he added.
Bharti-Walmart currently sources its private labels from 120 Indian companies.
But Neeraj Poddar of Ludhiana-based Asian Lakto Industries Ltd that supplies packaged juices to several local modern retailers, including Bharti-Walmart, is not worried about competition from global bigwigs. He said the learning from foreign suppliers would be useful to the Indian industry.
Wal-Mart has been sourcing products from suppliers in India for at least 20 years for its global operations. Major categories sourced from Indian suppliers include home textiles (including towels, shower curtains, bath mats, accessories, bedding sheets, kitchen linens), apparel (including wovens, knitwear and leather footwear), fine jewellery, tableware and home decor products.
“We are also partnering SMEs (small and medium enterprises) in India to grow their businesses by upgrading their processes, developing new products and leveraging Wal-Mart’s global sourcing network,” the spokesperson said.