Small regional brands get modern retail push

26 Dec,2011

By Sagar Malviya

 

Small and regional brands are tying up with retail giants to push their merchandise, as middle-class Indians shift from mom-and-pop stores to the comfort and variety of modern retail.

 

The latest to join the bandwagon is ayurvedic products maker Baidyanath Ayurved Bhawan. The 95-year-old company has tied-up with Future Supply Chain Solutions, the logistics arm of retail giant Future Group to widen its consumer base and boost its position in the health products segment where it competes with Dabur and Emami. The Kolkata-based company will use Future Supply Chain’s network to sell its ayurvedic medicines, tonics, hair oils and toothpastes in more than 2,000 outlets in the country.

 

Future Supply Chain serves several large retailers besides the parent group’s Big Bazaar.

 

“More than just sales, modern trade gives a very high visibility that’s important to us. Also, it’s an easy way to break into newer markets without investing substantially in distribution,” said Ameve Sharma, president of the over 350-crore Baidyanath.

 

This strategy is not only giving smaller brands a pan-India presence, but also helping them reap dividends. Within a year, the share of organised retail in total sales of brands such as Wagh Bakri tea, Super-Max shaving products, Nilon’s pickles, Dukes biscuits, NR Group’s Ripples fragrances has risen from near zero to about 15%.

 

“Due to consumers moving and settling across geographies within the country, we are able to support small and regional brands get national footprint and also where relevant communities stay,” said Devendra Chawla, president of FMCG and food at Future Group. “For several small vendor partners, setting up distribution networks can mean lot of resources and costs. Modern trade is the quickest route to market in relevant markets,” he added.

 

The move is also partly driven by the need to be where the competition is. “You have to be where your competitors are,” said Ravi Chandra, general manager, sales and marketing at Super-Max Personal Care, which earned 2% of sales from modern trade from just 0.2% a year earlier. “We have heightened our focus on modern trade as our product portfolio matched the target consumers of these stores,” Mr Chandra added.

 

Nilon’s, the country’s largest pickle brand that was available in some 100 stores two years ago, is now available in 400 stores.

 

“We were hardly present earlier in Mumbai and Tamil Nadu. We realise that the future in big cities is through large outlets,” said Nilon CEO Rajheev Agrawal. The company has seen sales from modern retail rise from 7% to 15%. Future Supply Chains, which works with 20 such clients, has added half of its clients over the past one year.

 

“No distributor has an all-India presence, and that’s where we come in. We also take care of shelf and merchandise management,” saidAnshuman Singh,MDand CEO of Future Supply.

 

However, firms say that jump-starting sales has its own problems. The margin for modern trade is higher than that of general trade, and small brands end up paying about 10% more than their bigger counterparts. But they are not complaining. “The fallout of margins is basically on the return on investments calculations and large stores are increasingly giving higher throughput,” said Mr Chandra.

 

Also, these firms are getting into premium products, which need the platform of modern trade. For instance, Baidyanath is entering soaps and shampoos while Wagh Bakri Tea is focusing on tea bags and instant tea.

 

This trade route has another plus: when a retailer expands, it carries the product with it. “Retailers have almost doubled their stores. This means more sales of our products,” said Anik Mukherjea, chief business creator (fragrances) in NR group, the Mysore-based maker of Cycle Agarbattis and Ripples.

 

Source: The Economic Times

Copyright © 2011, Bennett, Coleman & Co. Ltd. All Rights Reserved

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