Small & new Brands – Driver of 80% of Indian FMCG market

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If you have ever noticed, how many small scale
brand companies are involved in the FMCG sector in India? You will be surprised
to hear that there are around 30000 small-2 brands of Grocery and consumer
durables, footwear and clothing catering to the needs of 80% of the population
in India but we are in light of only 20% of the corporates who rule the FMCG
sectors. Some of them are HUL, Dabur, Marico, Colgate, P&G, Bajaj etc but
they are feeders for 20% of the demand. It gives us space for a future where we
might think there's still a big room to grow.

You will find that different brands have a
presence in a range periphery and it goes to different 2 areas. According to
market sources more than 10000 brands were launched during the COVID time in
2020-21 in different parts of the country. The momentum in the FMCG sector is
still aggressive.

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According to the survey by traders' body CAIT  above statement is validated in the  news article of Economics times.  Link given here : https://economictimes.indiatimes.com/industry/cons-products/fmcg/products-of-30000-small-brands-cater-to-80-pc-of-population-report/articleshow/90894928.cms

“Household
products of over 30,000 brands operating at small and medium scale cater to a
majority of the country's population, while only 20 per cent use such items
sold by big corporate houses, a survey said. Products of Fast Moving Consumers
Goods (FMCG), consumer durables and cosmetics from over 30,000 small and
medium brands are catering to the demand of 80 per cent of India's population,
according to the survey by traders' body CAIT. The survey was conducted on the basis of use of item
including food grains, oil, grocery, personal cosmetics, inner wear, ready-made
garments, beauty and bodycare, footwear, toys, educational games and healthcare.

"It's
a myth that about 3,000 big brands of corporate houses, particularly in the
FMCG sector, consumer durables and cosmetics Etc are catering to
the needs of the people of the country. In fact, more than 30,000 small and
medium but regional level brands are the largest contributor in meeting the
demand of the people of India," CAIT (Confederation of All India Traders)
said.

The
survey said the demand of a vast majority is fulfilled by the products of small
and tiny manufacturers sold in loose quantity.

Big
brands are in demand among people of higher and upper-middle class due to
extensive media and outdoor publicity and endorsements by celebrities, CAIT
secretary general Praveen Khandelwal said.



On the other hand, brands of small manufacturers
are sold through one-to-one contact between customers and shopkeepers, also
through word-of-mouth among people of medium, lower-medium income groups and
those belonging to economically weaker sections, he added.( Originally
published on Apr 17, 2022 )”

 

New candidates are entering this segment,
especially after the funding to varioius D2C Brands. Mamaearth and many other
brands received a good amount of funding. Now, we can say that VCs are
interested in investing money in companies where the future of private label
brands is more visible and they can see 20x growth in terms of ROI.

Many more will come up with many newer ideas.
Recently "One Dry Fruits Brand Happylo" has got good funding.
Platforms like Amazon and Flipkart are providing great opportunity to brand
makers to showcase their products to millions and even billions of consumers.
This is the power of the platform.

Developing a distribution channel is going to
be a challenging task for small and small brand owners as not everyone is able
to find a place on the eB2C platform, so that they can eventually find a place
in the kirana retailers. Again it is a huge task to provide the self-space to
their products at Kirana Stores. Retailers are also facing the problem of space
at their stores. Every day 5 new brand sellers approach them. There is no doubt
that the products are good in terms of packaging and quality but without
finding proper retail location one cannot think of bringing it to market for
the consumers. And the retailers have limits on the amount of space in the
store so that they can entertain or not.

More than 70% of new brands are off the shelf
within six months of launch, or at most one year. And those who do manage to
make a living are struggling to stick to the shelf space at those retail
stores.

Many small brand owners are not in a position
to allocate huge market budgets or depute a skilled sales team or expand out of
the region in a short period of time.

The other main issue before the new brands is
to find willing distributors for their products/brand as the distributors are
not interested in selling the new products on credit. Margins are also thin as competitions
also go stiff.  Retailers want new
products on credit terms but if distributors are not able to provide it, one
cannot expect that there will be coverage in the target market. If somehow they
hire distributors in the respective area they are not able to sell them to the
retailers due to lack of FOS (feet on the street) skills and low payment and in
lack of incentives or motivation.

Things
will go on and off but it is time to fix the retail ecosystem by giving it a
centralized distribution system backed by robust IT platforms. It is time to
consolidate the supply chain and make the best use of capabilities and bring
operational efficiencies, then small brands would get a common and unified
platform for their products and would be able to expand into new areas with the
help of aggregation. Things will progress for the better but in the way we do things.

The time is coming for those
brands where you will get a small brand which will have a national presence. He
will no longer be called a regional player.

We are working to deliver
solutions to food and grocery manufacturers and connecting them to a large
network of retailers through a one-of-a-kind block chain solution and
hyperlocal distributions channel

Written by : Balwant Singh Rana: 18.05.2022,
Jaipur

 

 

India can feed the World - A dilemma of Ban on Wheat Export

"India is ready to feed the
world" PM Narendra Modi said on Tuesday, April 12, 2022.
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We should trust the said words of PM Modi. It really matters a lot when
Modi is saying these words and the world is going through a food crisis. On the
other hand, the food crisis in the eastern part of Europe and Africa is getting
worse day by day. Ukraine's major food supply chain was severely stuck after
Russia's invasion of Ukraine. The impact of the war is huge on wheat and edible
oils, although many other commodities are prominent, but wheat is one of the
major commodities that has caused demand collapse across the world.

Ukraine and Russia together contribute
30% of the world's wheat production.

Therefore, the huge share in the supply chain is now clearly visible
everywhere. At the same time, India being the largest producer of wheat has the
potential to feed the world but there are other internal issues where the
greater responsibility is the issue of India's food security. However, our PM
shared his views with the world that India has the capacity and capability to
feed through our natural agricultural produce and in other words can supply
them to feed on a large scale.

At the same time, it was decided by the Government of India to export wheat
and ensure that the gap in the supply chain of wheat caused by the
Russian/Ukraine War was quickly filled and to take the opportunity to dominate
the international market.

This has given us an opportunity to
show our strength to the developed countries.

Undoubtedly more than 7.85 million
tonnes were exported during the financial year 2021-22, and ~1.1 million tonnes
were exported in April, 2022.

It was stated that India could export 10 million tonnes of wheat by the end
of July 2022. Things were going well, the Kandla port became congested due to
heavy traffic of ships and thousands of trucks outside the port. Kandla has a
strategic advantage due to its proximity to the western port and wheat
producing states.

The direct export of wheat has given a big support to the prices, farmers
are getting better rates above the MSP. Things were in a straight line either
way. Once the Indian government opened up the export of wheat, paving the way
for the world where things were coming from India in the best possible way.
Private companies started signing and selling to foreign buyers. You may be
aware that due to the decision of the Government of India and the priority
loading at the load port, exporters of other commodities such as wheat flour,
rice and other commodities have to wait for a month for the birth of their
vessel. In such a situation, they are facing heavy losses, why only because of
wheat and that GOI made on their priority list.

On can compare the prices with MSP. Base selling ex-warehouse rates were
around Rs.2250/Qntl during April, 2022, which was F.O.R. Kandla Rs.2550~ per
quintal.

More than profit to individual
exporters it was a pride that we are exporting Wheat. India is exporting wheat
where we are going to fulfil the hope of countries where food crises is on the
edge. On the other hand, this will give supports to the ambitious words
of PM Modi which he given to world that India is going to feed the world.

But, in between something happened unexpectedly,

On May 13,
2022 the government banned all private wheat exports with immediate effect. It
was not expected that GOI will take this action without

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consulting with the trade bodies. 

My concern is why Govt. of India took this kind of decision. Is there no
worth or importance of Indian exporters who brought tons of value of wheat at
Port for loading to their buyers as per the policies of DGFT.

Is this a decision that only hurt exporters, transporters and shipping
agents? Is not this hampering image of our country?

Still 1.2 million-ton wheat of 2700~ crores is lying at various port areas
as on date or some are saying 2 million ton stocks, however exact figures are
not available on public portals or even APEDA has nothing to share. Amazing
things. At this age of technology, we don't have the exact stocks which are
moved for export and lying at port areas. Unexpected things are making the
noise and hampering our image. 

I have few ethical questions asking to Concern Ministry of GOI:

• Why Wheat
  export is allowed without evaluating the internal facts?


• What will
  happen to nice words of PM Modi which he delivers to world that India will
  feed the world?


• Without
  consulting or going through the facts why Ban is imposed on Wheat export?


•  Who
  cares about India’s image in WTO?

I understand that first of all we should think about ourselves, our
country, but also we should think about our business houses/our exporters and
the people in this ecosystem who have done this through the circular of the
Director General of Foreign Trade. Money was spent on one word. , For those
people, the wheat export circular was not from DGFT, it was from PM Modi "when
he said that India is going to feed the world"

I request the concerned Ministry to look into the matter and before taking
any further steps, request for exemption to those exporters whose stock is
lying in port warehouses and are ready to ship. Most of the contracts are done
on CAD basis, so they will not be able to produce LC at this time. However,
such hasty decisions by the Government of India will certainly bring disrepute
to our country, our business practice and trust.

Written as a commodity analysist and trader by me,