DMart eyes higher margins via private labels-OxBig News Network

This move mirrors a broader trend in value retail, where private labels are increasingly being used to drive affordability and protect margins. Private labels are in-house brands often sold at lower prices and are owned and sold exclusively by a retailer.

“Fast moving consumer goods (FMCG) companies are expandingtheir product lines and trying new things, like HUL is cutting back on palm oil, and Nestle teaming up with a drug company for a new recipe,” said an equity research analyst working in a Mumbai-based brokerage firm who did not want to be named.

Dmart’s rival Tata Trent Star Bazaar has built a successful private label category which has more than doubled its revenue from ₹1,798 crore in FY23 to ₹2,699 crore in FY25. In categories where private labels are offered, they now contribute over 70% of sales, up from around 60% two years ago.

Vishal Mega Mart, which has a strong presence in tier-II and tier-III cities, reported revenue of ₹10,716.3 crore in FY25. While the company does not break out private label contribution in its financials, industry estimates suggest that 65-70% of its sales come from in-house brands across apparel, footwear, and general merchandise.

DMart has started expanding its private labels in categories such as detergents, beverages, soaps, and biscuits under various brand names such as “Star Bright”, “Sparkle”, and “Bisky Bites”, which compete with similar product lines from some of the country’s largest fast-moving consumer goods (FMCG) players, including Hindustan Unilever (HUL), Nestlé, and ITC.

Mails sent to DMart did not elicit a response until press time.

“DMart is attempting to increase its gross margins by adding private labels in more categories (HPC, foods); this may only partly offset QC-induced footfall and cost pressure,” according to a Kotak Institutional Equities Report written by Garima Mishra and Ishaini Swain on 23 June.

Private labels

According to the report, these private labels now occupy 20-30% of shelf space in select product categories at DMart outlets. The retailer previously restricted private labels to its staple product category under the “Premia” brand, which was started in 2002.

According to the report, these private labels are priced about 30-70% lower than some of the branded FMCG products. This underscores the retailer’s vision to sell everyday products at “everyday low prices” to Indian consumers. For example, its private label detergent, Star Bright, costs ₹72 per kg, while P&G’s Tide costs ₹125 per kg. Similarly, the retailer’s mango juice under the Go Fruit brand sells at ₹34 compared to Parle Agro’s Frooti.

Founded by billionaire Radhakishan Damani in 2000, DMart opened its first store in Powai, Mumbai, in 2002. Today, it is India’s largest retail chain, with a market capitalisation of ₹2.8 trillion. The company went public in 2017 and has built its success by offering consistently low prices. DMart pays wholesalers upfront, often ahead of industry payment cycles and secures deeper discounts, which it passes on to consumers.

The company is currently navigating a phase of transition, facing twin challenges: a change in leadership and intensifying competition from quick commerce players. Longtime chief executive officer Neville Noronha, who has been instrumental in building DMart into India’s most valuable retail chain, is expected to step down by 2026. He will be succeeded by Anshul Asawa. “It seems like Asawa might have a significant challenge ahead given the high benchmark that Noronha has set,” said the analyst based in Mumbai.

The retailer’s aggressive push into private labels also coincides with the rapid rise of quick commerce players such as Zomato’s Blinkit, Swiggy’s Instamart, and Zepto, which have been making inroads in several cities, especially in tier-II and tier-III cities, where DMart has limited presence. According to the Kotak report, there are over 100 cities where one or more quick commerce platforms have a presence, but DMart does not.

“Quick commerce is outpacing DMart Ready, which operates more like traditional e-commerce with one- to two-day delivery. In contrast, quick commerce players deliver within minutes,” said the analyst.

Increasing coverage

DMart currently has stores across 152 cities, while Blinkit operates in 194 cities, followed by Instamart and Zepto that are present across 116 and 73 cities.“In urban and metro markets, quick commerce has high penetration, but DMart is present even in places where Q-commerce hasn’t reached, so I think it will be able to keep up with rising competition,” said Pratik Prajapati, equity research analyst at Ambit.

Despite its value positioning, DMart’s profitability has come under strain in recent years. According to the company’s FY25 financials, the company’s Ebitda margin, a profitability metric that indicates the company’s operating performance, declined from 8.5% in FY23 to 7.6%, even as gross margins remained steady at 14.8%.

“The main reason for this drop is due to rising employee costs,” said the analyst. The employee cost now accounts for 6% of revenues, up from 5.4% two years ago.

“The private labels tend to be cheaper, and if the consumers are satisfied with the quality of the products, the expansion will deepen further,” said the analyst. “In the long term, this can impact the margins of some of the branded FMCG goods.”

The private label push is also supported by DMart’s ongoing store expansion. DMart added 50 stores in FY25 and plans to open about 75 new stores over the next three years, according to the Kotak report on 23 June 2025. States like Uttar Pradesh and Odisha are expected to be key focus areas. The company recently entered Agra, marking its first expansion into the state beyond Ghaziabad. The company clocked a revenue of ₹59,358 in FY25, a 16.9% increase over the previous fiscal year. The company’s net profit jumped 6.7% from ₹2,536 crore in FY24 to ₹2,707 crore in FY25.

“Private labels not only improve margins but also give customers more choice within a price band,” said Prajapati. “If customers are satisfied with the quality, they are likely to stick with the brand over time.”

“As they gain acceptance, we’re already seeing revenue pressure on traditional FMCG brands. Brand cannibalisation will likely continue as competition intensifies”, said the analyst who did not want to be named.