Labelling performs various functions. Its important functions are:

(i) Describe the product and Specifies its contents: Label describes the product, its usage, cautions in its use, and specifies its contents etc. eg. A popular brand of Prickly Heat Powder, describes how the product provides relief from prickly heat and controls bacterial growth and infection. Label describes the product, its usage, caution in its use and specifies its contents etc.

(ii) Product or Brand Identification: The label identifies the product or the brand. For example, The name stamped on a cold drink identifies it as Pepsi, Coke, Thums Up, Fanta, etc.

(iii) Grading of products: The label might also grade the product into different categories, where the differentiation tends to be marginal.

(iv) Providing Information Required by the Law: It is a carrier of information, which is to be provided to the customer. The label describes the product, the manufacturer, date of manufacture, its contents, directions for use, price, etc.

(v) Product Promotion: A carefully designed label can facilitate product promotion. It attracts attention, describes the product, gives the reason to purchase. Particularly in case of a fast moving consumer goods sector (FMCGs), label has become a patent tool of sales promotion.