Brand Loyalty Crumbles! India's Consumers Flock to Private Labels for Value: EY Study

A significant shift in consumer purchasing behavior is underway in India, with more than half of domestic consumers now quickly switching brands and opting for private labels to seek better value, price, and pack sizes, according to a new study by EY India.

This evolving trend indicates that traditional brand loyalty is waning as consumers become more open to experimentation and incorporating multiple brands into their shopping baskets. This dynamic is contributing to the growth of smaller, regional brands, as well as direct-to-consumer (D2C) brands within the fast-moving consumer goods (FMCG) sector.

The Evolving Marketing Landscape

The rise of content creators and social media influencers is dramatically altering the traditional one-way communication model between brands and consumers. Consumers increasingly rely on these digital personalities for brand choices. Furthermore, Artificial Intelligence (AI) is accelerating marketing timelines and impacting outcomes, raising concerns about potential redundancies in marketing departments.

• AI's Disruptive Role: AI tools are compressing timelines and boosting outcomes, forcing marketing teams to adapt.
• Shift in Advertising: The linear model of brand communication is changing due to influencers and AI.

Rethinking Marketing Strategies

Snehasis Bose, group chief strategy officer at Saatchi & Saatchi India, BBH India, and Saatchi Propagate, emphasized the need for a "reset" in marketing teams. He proposed a "four-step shift from waterfall to loop" to achieve sharp returns without radical team changes.

• The Four-Step Shift: This involves establishing an intelligence council, an experience team, a cultural insight translator, and a shared dashboard for internal teams and agency partners.
• Unified Content Calendar: Maintaining a unified content calendar with digital agencies is crucial, especially with influencer marketing creating multiple brand voices.

Maintaining Brand Safety and Trust

Manisha Kapoor, CEO and secretary general of the Advertising Standards Council of India (ASCI), highlighted the challenge of balancing brands, consumers, and influencers. Concerns about brand safety and trust arise when multiple influencers interpret a brand's message differently.

• Influencer Vetting: Marketers should prioritize influencer expertise and professional experience.
• ASCI's Role: The Advertising Standards Council of India offers an influencer certification program to enhance compliance and assess professional expertise.
• Disinformation Risk: Creative messaging from influencers must avoid disinformation and misleading claims, a growing concern as digital advertising expands.

A report by PwC predicts that digital revenue share will grow from 33% in 2024 to 42% by 2029, driven by mobile consumption, underscoring the increasing importance of digital media and advertising.

Sector-Specific Caution

Kapoor advised marketers to exercise greater caution when collaborating with influencers in sensitive sectors like healthcare and financial services, which directly impact people's financial and physical well-being.

Impact

This shift towards value-seeking and private labels could pressure margins for established FMCG brands, potentially leading to increased investment in D2C channels and influencer marketing. Companies failing to adapt their strategies may lose market share. For investors, understanding this consumer behavior change is critical for evaluating FMCG stocks. Impact Rating: 8/10

Difficult Terms Explained

• Private Labels: Products manufactured by a retailer or reseller under their own brand name, often sold at a lower price than national brands.
• D2C Brands (Direct-to-Consumer): Companies that sell their products directly to customers, bypassing traditional retail intermediaries.
• FMCG (Fast-Moving Consumer Goods): Everyday items sold quickly and at relatively low cost, such as packaged foods, beverages, toiletries, and over-the-counter drugs.
• Waterfall to Loop: A shift from a linear, sequential process (waterfall) to a continuous, iterative process with feedback (loop) in project management and strategy.
• Intelligence Council: A group tasked with gathering and analyzing information to inform strategic decisions.
• Content Creators/Influencers: Individuals who produce content for digital platforms and have a significant following, influencing their audience's purchasing decisions.
• Brand Safety: Ensuring that a brand's advertising is placed in contexts that are appropriate and do not harm its reputation.
• Disinformation: False information that is spread, often with the intention of causing harm or misleading others.