Big brands creep into rural arena via ration shops

Big brands creep into rural arena via ration shops

Author | Source: The Economic Times | Friday, Sep 29,2006 8:25 AM

Big brands creep into rural arena via ration shops

Guess who's helping companies realise their rural dreams? It's your neighbourhood Fair Price Shop (FPS). Companies have discovered an effective route to reach out to Gujarat's rural consumer, who is certainly richer than his counterpart in many other states.

Biggies like Hindustan Lever, ITC, Hutch, Amul and BSNL are using the fair price shop distribution network - 16,000 units-strong - to push sales in villages. More, several biscuit makers such have approached the Gujarat government, which is promoting the idea of rural malls, to seek necessary clearances to use the network. Players like HLL are even willing to pay more margins to rural mall owners.

“HLL is offering 1.5% extra margin to FPS owners. If this model works as per the plan, we'll be able to give a tough fight to malls,” says Prahlad Modi, president of the Gujarat Fair Price Shop Owners' Association. It's a mutually-beneficial business equation: The FPS shop owner gets more business and the companies, mostly FMCG players, get to use a very effective distribution channel.

Apart from HLL and Hutch, Seeds Corporation of India, IOC, BPC, Mobil are also keen on using the FPS network, say government officials. “We have tied up with four FPS in Banaskantha village. The results are impressive,” says BM Vyas, managing director of Amul. The Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns Amul brand, has initiated its Amul Preferred Outlets (APO) in tiny villages. GCMMF has already converted three FPS into preferred outlets. “We have made the owners renovate the shop,” he says.

Sources say there are around 16,000 FPS in Gujarat. “So far, we have modernised around 300 shops across the state. We intend to convert 1,000 such shops into mini-rural malls in a year,” says SK Nanda, principal secretary, civil supplies department of the state government.

The government's vision is to transform FPS into swank shops, which sell SIM cards and FMCG products. These shops are not confined to selling just wheat, rice and kerosene at subsidised rates.

The Gujarat government has also tied up with nationalised banks to offer Rs 2 lakh to FPSs for upgradation. Mr Nanda says the upgradation will help them scale up their earnings. “Many companies are willing to offer additional discounts to the FPSs, which will help them counter the onslaught from competitors. Every FPS owner should have 300-400 sq ft space,” he says.

“Our feedback suggests that the modernised FPS boosts business,” says Mr Modi. According to him, earlier the shop owners used to sell only PDS items. “Now, we have a wide range. It's better for consumers also,” he says.

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