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FMCG cos take a personnel interest in outlets

FMCG cos take a personnel interest in outlets

Author | Source: The Economic Times | Monday, Dec 05,2005 8:27 AM

FMCG cos take a personnel interest in outlets

Fast moving consumer goods (FMCG) heavyweights such as HLL, P&G, Britannia, Nestle, Cadbury, Colgate and others have begun deploying key personnel and improving on their incentives to further drive the performance of modern retail formats that have been throwing up 'substantially higher than expected' volumes during recent months.Volumes from these formats such as hypermarkets and discount stores have grown 50-60% vis-à-vis the expected 25-30%, industry sources said.

Several FMCG CEOs and senior industry managers have made trips abroad recently to study the business deals done by their global counterparts with bigger retail players such as Wal-Mart, Sam's Club, Giant and Target,

The overall impact has been that FMCG companies have a separate account manager who takes care of the modern trade.This person acts as the single-point contact for all categories unlike the earlier system where there were different category managers who would deal with respective distributors.

A bigger number of higher-income Indians are preferring to shop at these formats because of convenience, higher standards and better ambience.Senior HLL officials told ET that the growth rates from the formats have been 'pretty high', encouraging them to up discounts and incentives compared to other traditional channels.

There were about 2,500 modern trade stores in '04 across India compared with just over 1,000 in 1998, according to a HLL presentation. FMCG modern trade stores have been growing at a CAGR of 15% per annum in the past five years and account for about 3% of their sales now.

Their contribution is higher in metros at about 9% and about 20% in southern Indian metros where the organised retail penetration is higher.Top officials from Cadbury India said formats such as Big Bazaar have contributed sizeable number to their overall volumes, especially of large packs

This represents both an opportunity and a challenge for FMCG companies.The opportunity is in being able to successfully position their products in these stores where displays can make a big difference to their sales.

The challenge lies in servicing these stores' unique needs compared to the normal retail outlets, and also in competing against their private label brands.“The impact of the new formats on business is being realised now by the industry majors now and they are getting more sensitive to the channel,” said Jitu Mehta, managing director, Food World.In the initial stages, these stores will depend on the large companies to fill their shelves, but will get better trade terms compared with an ordinary retailer.

His is evident from the fact that HLL claims a 75% share in detergent bars in the modern trade channel for the product compared the overall share of 56%, in washing powder sales at 54.5% (51.9% overall) and 46.2% in tea (36% overall).An AT Kearney report on modern retail cites the changing retail landscape in the country to the increasing mobility among the middle and upper-middle classes and increasing urbanisation.

“Higher affluence levels, increasing purchasing power, changing demographics and aspirational parameters of the Indian population and real estate developments across the country have aided the growth of retail formats,” the report stated.

Tags: e4m

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