The purpose of this article is to bring more clarity about the CPG segment and how we can go with the new definition. Why do we need a new definition for the CPG segment and how it will affect its status in the coming years? Same way how new brands in the food segment will affect the CPGs bandwidth and its definition for more coverage.
Meaning of CPG brands: CPG stands for Consumer Packaged Goods and is used to describe products that have to be replaced every so often due to their daily/weekly use. Examples include food, clothing, apparel, and beauty products. Now this definition goes a little refined as many food brands are now available in consumer packing which means they are fast-moving in the hands of retailers’ / end consumers. We will consider this topic a little bit centric on Food & Grocery brands under the CPG regime. Fast-moving consumer products basically referred to products available in consumer packaging which move fast from the retailers/ commerce platform and are consumed fast by the consumers. I have my views on the CPG market and how it will change the new shape in near future.
The FMCG market in India is expected to increase at a CAGR of 14.9% to reach US$ 220 billion by 2025, from US$ 110 billion in 2020. (As per Brand Equity Foundations). Here we have to understand which companies /brands are representing the Indian FMCG market so far, $ 110 billion market is like
a tip of the iceberg. " We have to include the full iceberg" in the definition of CPG.
recovery and promising macro factors indicate a double-digit growth for FMCG in India, in 2022”
Top 50 FMCG national-level brands: this list only covers 30+ brands.
Food category.
5000+ companies in Personal care, Confectionary & Snacks, Beverages, Dairy & Bakery, and Home Care are prevalent in India. They are among the brands contributing 80% to this segment. I don’t have a relevant data source from which I can get the brand-level penetration of food products as this segment is a highly unorganized sector but soon going to become part of CPG in India. How it will happen? The answer to this is "Change in consumer preferences", Brands evolved themselves according to the need of end consumers, and keeping in mind the buying behavior of the medium to lower class they are coming up with product innovations in terms of quality and packaging in a fast-paced manner.
The way non-food came in sachet packaging like shampoo, hair oils, and other personal care products we can expect that one day we will have edible oil, sugar, tea, and mixed spices in the same way. We have more than 300 million people living below the poverty line and a majority of consumers are buying their food/staples on daily basis. They don't have a budget to buy the ration for the whole month. I believe, soon food will be available in sachets or small consumer packaging, so the definition of CPG is going to evolve.
CPG definition seems narrow when we talk about the products. A standalone brand in a consumer packaged product that moves fast in the market or is heavily demanded by the consumers is something called FMCG/CPG but in India’s scenario we need to enlarge the coverage of this definition, soon you will find that regional food brands will also come in this definition.
We have seen how the main staples/ food were sold in India in earlier days. We don't need to go back much but 15-20 years back food like main staples used to sell in loose by the retailers. RATIO was 70-30% i.e. 70% bought by the consumer in loose and 30% was the contribution of Packaged food. Major staples like Rice, edible oil, Sugar, spices, Dal, etc were sold loose to the consumers but now these come in consumer packs. However, one thing, we need to understand, India’s population lives in rural areas, and still, there 50% market in the main staple is largely dealt with in the loose form. Here we are covering the study up to Tier III.
Logically, we have to include them under CPG brands, and if we do this what will happen? The market size of CPG brands will increase to $ 600-700 billion from its existing $110 billion because of the contribution of the packaged food segment. Food is contributing 60% of total grocery retail. The current size of food & Grocery is around $611 billion as per https://www.researchandmarkets.com which is expected to grow to $ 978 billion by 2025.
Taking this figure of $978 billion out of which the $ 220 bn market will be catered by the pure play FMCG brands by 2025 majorly contributors of those were the top 50 national level & top 100 companies of regional level under the segment of CPG/FMCG. As per the market data CPG market will have a $220 billion size by 2025, i.e. 23% of total grocery retail, but, we will have 78% market which is full of opportunities for our new regional & local players. For ease of my write-up, I am taking Food & Grocery in the CPG which will have $978 bn market by 2025, and accordingly will talk about it here. Again refining it to a digestive level I can forecast that 30% market will be driven by Staples in Bulk, upto this size let me be conservative.
we will have a $685 bn evolved CPG market size by the end of 2025.
( $978bn - 30% of $978bn= $685bn).
Who will be the contributor to this rally?
Interestingly, in recent years, we have seen tremendous development in this segment. The startup ecosystem is also giving acceleration by way of bringing technology-led disruptions. We have seen brands directly approaching consumers, these D2C brands are creating a big funnel. Brands like Mamaearth, beardo, Nykaa, and Sugar Cosmetics are doing wonderful, as per market sources more than 800+ D2C brands are available in the Indian grocery market. Likewise, regional players are introducing their products in various categories. On the other side, eB2B startups are working directly with retailers and claiming to give direct reach to brands. As per the eB2B startups, Brands do need not to work for the development of their distribution channel. Startups like Udaan created a big platform of retailers through their 35+ state-level hubs. More than 1000 eB2B startups are working in bits and pieces across the country but still, they are not able to place new brands at retailer’s stores i.e. offline/GT. Traditional distribution plays an important role when we talk about wide coverage and penetration. Here would like to mention that we should not take the success of D2C brands as they are penetrating through e-Commerce marketplaces but, has limitation in scaling business volume in the short run. D2C brands also start facing problems in terms of visibility which customers want to physically check, look and feel. I will cover their problems in my next write-up.
So far 5000+ brand companies already working in various segments. Some of them are at the regional level but most have a presence in their local territories. During Covid i.e. the year 2020 and post-Covid, it is said that more than 10000 FMCG & food brands came but 90% of them could not do much or could not make them sustainable, resulting in leaving the market before taking their first breath. (it is an estimate, however, there is no reliable data available)
Why did this happen to them? What are the challenges they have to face or they could not make their way long?
It is very imperative to understand the root cause. If I am a manufacturer or a brand owner my aspiration will be totally to create a brand that will give me a good name, fame, and profit. I will go with the traditional and modern distribution system in the country and will make my brand available at each Kirana store/ standalone supermarket and online availability i.e. will have an Omni channel presence in the market.
Still, there is a long list to outline the problem side but I will start with the following points how these issues make a stuck in dealing with these problems, and what is next with them as a solution. Making a product market fit always remains a challenge for new brands but it is going tougher day by day because of new developments by the big corporate houses, startups, and emerging corporates. The Challenge of competition is good but if big fishes are in the pond then we will have to
understand the situation of small fish also. This will have happened to them and it will remain there.
It is up to the brand to choose the best distribution channel for their products but sometimes it depends on the nature of the products and how strongly it is placed in the overburdened category. It is always advisable to go for a thorough market survey before a manufacturer introduces their products to the market. Many marketers now talk about working with Omni channel, i.e. brand has to be everywhere from offline to online and vice versa. That’s why I mentioned that market fit should cover all these topics well before introducing the product in the market.
Let’s put some focus on the problem side faced by the brand manufacturers or brand owners in making their product-market fit.
· Challenge in the creation of traditional distribution channel – Business / ROI
· Indifference mood of retailers is a placement obstacle – Space & competition
· Conflict between market channels – GT/MT/E-com
· Manpower is one of the big issues – retention
· High demand creation cost – Pull strategy
· No call for action medium available in an initial marketing campaign – Focused marketing strategies
· High cost of Technology intervention - Sales order application & Data Analytics
· Impatience behavior of brand owner - Valuation, aspiration to make the venture successful in a short time.
The first challenge is when we are going to identify the potential distributor(s) for our brand/product. There you will find that the selection process is very time-consuming and it needs rounds of meetings and getting into the boat of distributors. Since the distributor is facing their existence issues working with the existing brands, Struggling to match up the ROI, somewhere insecurity is there in their mind. As a brand owner first of all you need to download the brand vision to your potential distributors and should assure them that your brand is going to add value to their business and you will work on streamlining the processes and will bring ease of doing. You are there with them, may talk to retailers and convince them to provide space at the retailer’s stores and further will assist them in demand creation. More than product retailers need commitment From you. In this, do not create channel conflict in the first go. Go one by one.
Omni channel no doubt is an opportunity for you but your hurry will make your brand out of the market sometimes so there you have to go wisely. Follow the steps:
The journey of any new brand starts with the native city of the promoters. As a businessman or entrepreneur, you are following the business process and marketing practices and accordingly did the pilot run. If your product is a 'minimum viable product' and passed all the necessary market fit exercises then definitely you are working in the right direction. Earlier say 15 years back, brands have to go with GT stream because there was no modern trade/ E-comm penetration available. Don’t copy others, copycat always lags behind while making their strategies.
Firstly: If you are doing general trade (GT) in the open market in your native city, then you should not go there for channel conflict i.e. not go with modern trade placement or e-com platforms like Amazon/ Flipkart. Do not place your product with supply chain aggregators eB2B platforms however, it depends on the volume of business. Everything depends on the pace of executing things as per the strategy.
Second: You should not be like the frog in the Well. If you are working great in the GT market, then you don’t need to go with other channels with the same product SKU size & pricing. If your same product is available everywhere but there is price variation at the end of consumer, then you are going to cannibalize your brand. Try different product sizes and MRP if you want to place your product in modern trade or e-commerce platforms or other marketplaces. This will help you to maintain the pricing and your large market i.e. GT will not face price conflict. Always avoid conflict between market
channels.
Third: My suggestion, is don’t be part of the crowd, go out to another market, and try your product in an e-commerce platform or modern trade. The same is for small brands to go with selected A/B retail stores and standalone supermarkets in said market. If you have good liaising and you can convince modern trade retailers or e-commerce platforms you can place your product there. This will help new brand owners to create awareness among consumers. Centralized marketing expenditure will help you to leverage from there. Don’t be frog of the same Well.
Lending: Another main key driver of distribution is lending and logistics which the distributor has to do, in the current scenario, his main job is lending and logistics. But, the market took a different shape post covid in a different direction. Distributors are not interested to take credit exposure from retailers anymore. I have seen it in tier I & II cities. Almost 50-70% of sales are happening against COD or PDC maximum of 7 days. This is going to be a hurdle for new brands because without credit exposures Retailers are not going to entertain them by not giving space in their stores/shops, and even personal relationship of distributors is not going to work, hence the placement of these brands will not happen. Here you have to take a calculated risk on account of providing adequate credit to distributors so that the same thing they replicate with the retailers while making sales. However, again time will come for old practices to follow. The distributor has to follow the SLL ( Sale, Lending & Logistics) process if they want to remain in this line of business otherwise soon companies will go with the eB2B startups but still it will take a minimum of ten years or more to have such changes. Expanding by 2030 50% of traditional distributors will emerge as organized distributors and big organizations will come as distribution aggregation platforms.
RTV Policy: The third one is dealing with the RTV (return to vendors). Retailers don’t want to entertain those brands having no RTV policies. They don't want to be the shit cleaner in case brands have no demand or it gets expires on the shelf. In the current era, distributors are not in the mood to test the market and suffer losses due to the goods' returns from retailers. Here brands have to come with open minds and should clearly communicate the RTV policy to their distributors and retailers. Take risks, and build margin in your products so that you as a brand can sustain the setback of expiry products.
Inventory burden: Forth major pain distributors have to suffer from is carrying stock levels at their warehouses. They are working with various brands, and as per the nature of product and consumer demand, they have to maintain a minimum stock level at their warehouse. Sometimes they have to work with 15 days’ inventory cycle which is high if the said distributor is doing a sizeable business in the territory. As a brand owner, you will have to understand the pain point of the distributor. Hence try to maintain an on-demand stock replenishment system and how quickly you can build a robust supply chain.
Dealing with various stakeholders: Though this is related to the personal issues of distributors we have to understand how this is going to affect the external stakeholders or also to distributors in a big way. Sometimes we don’t evaluate the time factor but it matters a lot when it is related to a businessman or entrepreneur. After all, time is money. Distributors are working with 5-10 brands because without if they are not able to maintain their ROI, they will be out of it. They are dealing with say 8 brands. Naturally, the Area sales manager/ ZSM/brand owner/ Salesmen of these eight brands stay in touch with him on a daily basis because each one has their own interests, market developments, and interactions with business prospects. Dealing with various company personnel and sometimes they involve in BTL marketing activities like POP deployments at retail stores and arranging market visits for company officials. I will request you to sit for at least 3 hours to 4 hours at your distributor’s office. You will see, he is only communicating with the officials where they only talk about the target, scheme, and beat-wise sales strategy. So, hardly they don’t spare time to think about their business and its future development. I mentioned this thing here so that at the time you are going to select your distributors you must know how many brands he is dealing with, and go with small & mid-size distributors. Instead of daily follow-up with the Distributors go with a weekly session if you are an ASM/ or working as RSM. Or you have to go with aggregators who are doing DTR as organized distributors.
Marketing Support: Placement of products either at the distributor’s warehouse or retailer’s store by the distributors can be done initially using the personal reputation/relationship of your distributors but what is thereafter. As brand owners, a few companies are working on aggressive marketing support which they provide to their distributors and helping them wisely. But, many distributors go out of sight just because some brands do not understand the importance of marketing/demand creation/awareness in the focus market. Forget about building a brand if you are not doing demand-creation activities. In this dynamic era of marketing, everyone has to spend 50% of capital/ share of profit doing various activities. So plan your marketing wisely. Hire a good marketing agency that will guide you and will do the required PR activities at a marginal cost. Don’t hesitate to do this even at a low cost or being low profile.
Retailers are playing an important role in grocery retailing. Retailers know everything about their consumer, their shopping habits, customs, rituals, festivals, and financial status. As per open market data, 14 million retailers are part of Kirana retail in India. These mom & Pop stores/ Kirana stores are BIG contributors to our national GDP, something around 11%, and also one of the largest employers, contributing up to 8%, thus, we can understand the importance. Still, Indian grocery retail is dominated by these unorganized retailers, 95% market is in the hand of these Kirana retailers (for overall retail it is 85%). This would be an irony if we talk about their poor infrastructure, have you seen them working in a 150-200 sqft shop, filled with 350-500 SKUs and so much unorganized in terms of merchandising of goods?
We can see the development happening in other formats of retails but why Kirana retail is still so unorganized? Various Eb2b STARTUPS are claiming to empower them in various ways. The retailer is running his store in the same space which he was running 20 years back or 15 years back when there were limited assortments and limited brands. Now, after the emergence of technology and tech-driven marketplaces, and globalization of the supply chain, there is a change in consumer preferences and habits. Brands emerged and evolved themselves as per the need of end consumers but the main partner of the whole supply chain i.e. Retailers is still living in the old era.
Despite various development going on in this segment but Retailer is still in the middle of a dilemma and finding himself surrounded by various consumer-driven developments. This has brought some stiff competition for him and day by day losing business. The main culprit of his unrest is the online commerce and big box i.e. standalone retail giants like Reliance Smart, D-Mart, Local-Mart, Ratandeep, Vishal-mega mart, V-mart, and many other standalone supermarkets, and now a big threat is coming in the form of Q-commerce, an impulsive need base supply chain.
The main points of Retailer’s indifferent
moods are:
· Diversion of end consumers to other platforms - Business loss due to low product assortment & unhygienic condition of the store.
· Limited Store size – Limited Assortment i.e. not able to fulfill the evolved need of consumers.
· Limited Working Capital cycle – Cash payments to Supply chain partners
· Erosion in gross margin due – Not getting good deals from Brands
· Store is unorganized – need to revamp / Facelift
The above main Five elements are making him negative, however, a long list is there. He needs energy from the inside to do something new. New CPG brands definitely bring good taste to his margin but the limited space of his shop and indifferent mood is making him annoyed all the way.
New Brands owners need to first identify a good channel partner who can extend adequate credit with a feasible RTV policy to retailers then only retailers will show interest in onboarding new brands and provide product placement and visibility at their stores.
In nutshell –
· Challenge in the creation of traditional distribution channel – Business / ROI
· Indifference mood of retailers is a placement obstacle – Space & competition
· Conflict between market channels – GT/MT/E-com
· Manpower is one of the big issues – retention
· High demand creation cost – Pull strategy
· No call for action medium available in an initial marketing campaign – Focused marketing strategies
· High cost of Technology intervention - Sales order application & Data Analytics
· Impatience behavior of brand owner - Valuation, aspiration to make the venture successful in a short time.
The first challenge is when we are going to identify the potential distributor(s) for our brand/product. There you will find that the selection process is very time-consuming and it needs rounds of meetings and getting into the boat of distributors. Since the distributor is facing their existence issues working with the existing brands, Struggling to match up the ROI, somewhere insecurity is there in their mind. As a brand owner first of all you need to download the brand vision to your potential distributors and should assure them that your brand is going to add value to their business and you will work on streamlining the processes and will bring ease of doing. You are there with them, may talk to retailers and convince them to provide space at the retailer’s stores and further will assist them in demand creation. More than product retailers need commitment From you. In this, do not create channel conflict in the first go. Go one by one.
Omni channel no doubt is an opportunity for you but your hurry will make your brand out of the market sometimes so there you have to go wisely. Follow the steps:
Don't be the frog of the Well.
The journey of any new brand starts with the native city of the promoters. As a businessman or entrepreneur, you are following the business process and marketing practices and accordingly did the pilot run. If your product is a 'minimum viable product' and passed all the necessary market fit exercises then definitely you are working in the right direction. Earlier say 15 years back, brands have to go with GT stream because there was no modern trade/ E-comm penetration available. Don’t copy others, copycat always lags behind while making their strategies.
Firstly: If you are doing general trade (GT) in the open market in your native city, then you should not go there for channel conflict i.e. not go with modern trade placement or e-com platforms like Amazon/ Flipkart. Do not place your product with supply chain aggregators eB2B platforms however, it depends on the volume of business. Everything depends on the pace of executing things as per the strategy.
Second: You should not be like the frog in the Well. If you are working great in the GT market, then you don’t need to go with other channels with the same product SKU size & pricing. If your same product is available everywhere but there is price variation at the end of consumer, then you are going to cannibalize your brand. Try different product sizes and MRP if you want to place your product in modern trade or e-commerce platforms or other marketplaces. This will help you to maintain the pricing and your large market i.e. GT will not face price conflict. Always avoid conflict between market
channels.
Third: My suggestion, is don’t be part of the crowd, go out to another market, and try your product in an e-commerce platform or modern trade. The same is for small brands to go with selected A/B retail stores and standalone supermarkets in said market. If you have good liaising and you can convince modern trade retailers or e-commerce platforms you can place your product there. This will help new brand owners to create awareness among consumers. Centralized marketing expenditure will help you to leverage from there. Don’t be frog of the same Well.
Lending: Another main key driver of distribution is lending and logistics which the distributor has to do, in the current scenario, his main job is lending and logistics. But, the market took a different shape post covid in a different direction. Distributors are not interested to take credit exposure from retailers anymore. I have seen it in tier I & II cities. Almost 50-70% of sales are happening against COD or PDC maximum of 7 days. This is going to be a hurdle for new brands because without credit exposures Retailers are not going to entertain them by not giving space in their stores/shops, and even personal relationship of distributors is not going to work, hence the placement of these brands will not happen. Here you have to take a calculated risk on account of providing adequate credit to distributors so that the same thing they replicate with the retailers while making sales. However, again time will come for old practices to follow. The distributor has to follow the SLL ( Sale, Lending & Logistics) process if they want to remain in this line of business otherwise soon companies will go with the eB2B startups but still it will take a minimum of ten years or more to have such changes. Expanding by 2030 50% of traditional distributors will emerge as organized distributors and big organizations will come as distribution aggregation platforms.
RTV Policy: The third one is dealing with the RTV (return to vendors). Retailers don’t want to entertain those brands having no RTV policies. They don't want to be the shit cleaner in case brands have no demand or it gets expires on the shelf. In the current era, distributors are not in the mood to test the market and suffer losses due to the goods' returns from retailers. Here brands have to come with open minds and should clearly communicate the RTV policy to their distributors and retailers. Take risks, and build margin in your products so that you as a brand can sustain the setback of expiry products.
Inventory burden: Forth major pain distributors have to suffer from is carrying stock levels at their warehouses. They are working with various brands, and as per the nature of product and consumer demand, they have to maintain a minimum stock level at their warehouse. Sometimes they have to work with 15 days’ inventory cycle which is high if the said distributor is doing a sizeable business in the territory. As a brand owner, you will have to understand the pain point of the distributor. Hence try to maintain an on-demand stock replenishment system and how quickly you can build a robust supply chain.
Dealing with various stakeholders: Though this is related to the personal issues of distributors we have to understand how this is going to affect the external stakeholders or also to distributors in a big way. Sometimes we don’t evaluate the time factor but it matters a lot when it is related to a businessman or entrepreneur. After all, time is money. Distributors are working with 5-10 brands because without if they are not able to maintain their ROI, they will be out of it. They are dealing with say 8 brands. Naturally, the Area sales manager/ ZSM/brand owner/ Salesmen of these eight brands stay in touch with him on a daily basis because each one has their own interests, market developments, and interactions with business prospects. Dealing with various company personnel and sometimes they involve in BTL marketing activities like POP deployments at retail stores and arranging market visits for company officials. I will request you to sit for at least 3 hours to 4 hours at your distributor’s office. You will see, he is only communicating with the officials where they only talk about the target, scheme, and beat-wise sales strategy. So, hardly they don’t spare time to think about their business and its future development. I mentioned this thing here so that at the time you are going to select your distributors you must know how many brands he is dealing with, and go with small & mid-size distributors. Instead of daily follow-up with the Distributors go with a weekly session if you are an ASM/ or working as RSM. Or you have to go with aggregators who are doing DTR as organized distributors.
Marketing Support: Placement of products either at the distributor’s warehouse or retailer’s store by the distributors can be done initially using the personal reputation/relationship of your distributors but what is thereafter. As brand owners, a few companies are working on aggressive marketing support which they provide to their distributors and helping them wisely. But, many distributors go out of sight just because some brands do not understand the importance of marketing/demand creation/awareness in the focus market. Forget about building a brand if you are not doing demand-creation activities. In this dynamic era of marketing, everyone has to spend 50% of capital/ share of profit doing various activities. So plan your marketing wisely. Hire a good marketing agency that will guide you and will do the required PR activities at a marginal cost. Don’t hesitate to do this even at a low cost or being low profile.
The retailer is king and playing an important role in the hyperlocal & last-mile Supply chain, he will remain king even after Indian retail turn 50% organized. Retailers shall remain forever
Retailers are playing an important role in grocery retailing. Retailers know everything about their consumer, their shopping habits, customs, rituals, festivals, and financial status. As per open market data, 14 million retailers are part of Kirana retail in India. These mom & Pop stores/ Kirana stores are BIG contributors to our national GDP, something around 11%, and also one of the largest employers, contributing up to 8%, thus, we can understand the importance. Still, Indian grocery retail is dominated by these unorganized retailers, 95% market is in the hand of these Kirana retailers (for overall retail it is 85%). This would be an irony if we talk about their poor infrastructure, have you seen them working in a 150-200 sqft shop, filled with 350-500 SKUs and so much unorganized in terms of merchandising of goods?
We can see the development happening in other formats of retails but why Kirana retail is still so unorganized? Various Eb2b STARTUPS are claiming to empower them in various ways. The retailer is running his store in the same space which he was running 20 years back or 15 years back when there were limited assortments and limited brands. Now, after the emergence of technology and tech-driven marketplaces, and globalization of the supply chain, there is a change in consumer preferences and habits. Brands emerged and evolved themselves as per the need of end consumers but the main partner of the whole supply chain i.e. Retailers is still living in the old era.
Despite various development going on in this segment but Retailer is still in the middle of a dilemma and finding himself surrounded by various consumer-driven developments. This has brought some stiff competition for him and day by day losing business. The main culprit of his unrest is the online commerce and big box i.e. standalone retail giants like Reliance Smart, D-Mart, Local-Mart, Ratandeep, Vishal-mega mart, V-mart, and many other standalone supermarkets, and now a big threat is coming in the form of Q-commerce, an impulsive need base supply chain.
The main points of Retailer’s indifferent
moods are:
· Diversion of end consumers to other platforms - Business loss due to low product assortment & unhygienic condition of the store.
· Limited Store size – Limited Assortment i.e. not able to fulfill the evolved need of consumers.
· Limited Working Capital cycle – Cash payments to Supply chain partners
· Erosion in gross margin due – Not getting good deals from Brands
· Store is unorganized – need to revamp / Facelift
The above main Five elements are making him negative, however, a long list is there. He needs energy from the inside to do something new. New CPG brands definitely bring good taste to his margin but the limited space of his shop and indifferent mood is making him annoyed all the way.
New Brands owners need to first identify a good channel partner who can extend adequate credit with a feasible RTV policy to retailers then only retailers will show interest in onboarding new brands and provide product placement and visibility at their stores.
In nutshell –
“Dhanda rahega to aatmvishvas bana rahega, Deemag open rahega aur naye development honge”
When we write something on Kirana retail, many things cook simultaneously because various developments are going on there and the center of the axis is the Retailer who is most affected, without his intervention Brands will not go large in market coverage and will not
penetrate to the last consumers.
Stakeholders involved in the retail distributions are:
CFA | Super stockiest |Distributors | Vertical |Retailer | eB2B Startup | Horizontal | D2C | Quick – Commerce | Social Commerce | Super & Hypermarket stores | Online- Marketplaces | B2C startups | Price Cutters | Wholesalers
Equation Retail = 85% unorganized + 15% Organized
Technology Intervention and associated cost
We can’t deny the intervention of technology. Without it, we can’t think of scaling our business beyond the pilot city. Choosing suitable IT tools is one of the important tasks for every business entity. As a new brand if you are going with e-com trade then there will be proper visibility of last mile activities, and as a new brand, you can be benefited from the accessible data touch points and use it further for enhancing the capabilities. But, if you are planning to go through a traditional channel then choose a SaaS-based or proprietary solution. If you are a new brand entrant, I will not suggest going for a proprietary solution. The market is flooded with evolved categories of warehousing, distribution & supply chain-driven IT tools, market leaders are Bizom, Kirana King & many more. Efficient, evolved solutions of DMS and WMS are already in place and competitive in terms of cost. Try to find out the solution which provides you with complete solutions from demand creation to delivery and inventory holding to secondary sales.
Actionable
I would say that challenges will remain for new brands in CPG segment whether it comes from the organized trade or unorganized but the journey through retailers is going to be tougher day by day. No doubt, new brands come with innovation and bring a good margin spread for the entire value chain, but here we have to understand how these channels are going to welcome new brands and what special things they have to drive. Few things will help new brand owners and manufacturers when they are going to market with the right GTM strategy.
- Market centric - Start with your pilot city. Live all the things which you are carrying in your business model whether it is related to revenue streams, marketing & technology interventions. Do not rush to other cities without that otherwise, it will be a costly affair and one will go out of cash anytime in between and will be out of the market.
- Retailer’s Delight: Your direct interaction is with the Retailer so it should be in mind how you aregoing to provide the best peace of mind in your dealing. Three main things are in the retailer’s delights. Good Margin, Free Samples, Quality Assurance, Convenient availability, best RTV policy, Credit period assurance, and fast redressed of consumer complaints. If, being a new brand you take of retailer’s delight, in return they will help you establish your brand in their neighborhood
- Placement Strategy: Placement of products in the focus market always go as per the business strategy but I will suggest adopting either strategy, one is “Deep down” and the other is “Selective”. In deep-down strategy brands go with the entire market, here you need to start placement from the smallest shop, then small shop, medium shop, and then to A&B&C class shops, and start placement at each retail store irrespective of class or category. If you are driving your strategy as Selective, then you need to go with selected stores but such stores should be in strategic locations or should have a proper consumer base. Their high-end consumers will help you establish your brand in an upper segment so while selecting these shops go with the colony Kirana leaders.
- Call for Action: in Deep down placement strategy call for action become an easy tool to inform end consumers to buy your products from nearby retailers but when going with a Selective placement strategy you will find difficulties because you don’t have any uniform name where the call for action option can be exercised. To overcome this issue, you need to go with branded i.e retail chain stores. Like the Franchise store chain of kiranaking in Jaipur, Ratandeep chain in Bangalore and Hyderabad, Localmart in Gujarat, and many more standalone supermarkets like big box retailers.
- Distribution Channel: Always go with traditional distribution channels, for placement of new brands at the retailer’s store these names will be useful and they will help in cities in Tier 3rd and onward and rural areas. In Tier I, II cities many EB2B startups and logistics companies are doing DTR but they are not able to place new brands with the retailers. Before finalizing a traditional hyperlocal distributor channel partner, you need to go with a proper agreement that the distributor will extend adequate credit to retailers and shall comply with the RTV policy on time. In the same way, you need to give proper credit to your distributors. I will also advise you to go with distribution aggregation platforms that are working closely with Retailers, and distributors and have worked on unified technology platforms. You being a new brand owner don’t need to go for developing Distribution channels. Now, Startups are working, go with them, this will save you time for Go-To- market and in a short period of time will help to make your product market fit. Still, 40 % market is catered by formal channels but an informal channel of wholesalers is driving the secondary market in a big way. Though there is no direct feeding by the Brands, they buy their stuff from distributors or under cutters and further serve the small retailers.
- Marketing & PR: Wise use of social media is going dynamics these days. You don’t need to spend money on traditional marketing tools of ATL/BTL but today we can’t underestimate the uses of social media. Route your PR activities through social media. I have seen NCR-based startup ‘country delight’, they did the best use of social media and are now a well-known name in a very short period of time.
Soon FMCG/CPG market is going horde, thousands of new brands will be visible in the market, and they will definitely bet on their luck and will as usual try to do their product market fit, however, some of them will be for short period, some will struggle and few will get the best pulse of consumers and will succeed to establish themselves as a brand.
The definition of CPG will be altered and food &
I am sure despite so much struggle for new brand entrants, they are going to contribute to our GDP in a big way. This will surely help to achieve
staples will be included in the new definition. Soon, CPG/FMCG will have a one-word “Grocery”.
I am sure despite so much struggle for new brand entrants, they are going to contribute to our GDP in a big way. This will surely help to achieve
India would become $5 trillion economy in the next 5 year and the contribution of new CPG brands will be there
* Disclaimer: Data and market projections are based on the development going on in the market, however, size may vary from the given numbers depending on the actual scenario of retail at the said time frame in the future.
The article was written on : 10th, oct, 2022 in Jaipur. It will be published on Linkedin by 29 or 30th October 2022. you may get the link from here: https://www.linkedin.com/in/indiaretail
