In response to a slowdown in fast-moving consumer goods (FMCG) sales in traditional kirana stores, leading FMCG companies, including Marico, Dabur, Emami, and Bajaj Consumer, are charting an accelerated sales growth path for these small retailers. Despite the rise of e-commerce and the substantial growth of modern trade, kirana stores continue to constitute a significant portion—four-fifths—of total FMCG sales in India.
The chief executives of these FMCG companies highlight factors contributing to the sales deceleration in kirana stores, such as fewer product launches compared to e-commerce and organized retail, a decline in distributor credit, and a weakening demand in rural areas. To counter these challenges, the companies are strategically reinvesting in kirana stores, anticipating an improvement in consumer sentiment in rural areas in the coming quarters.
Marico’s Managing Director, Saugata Gupta, emphasized the need to rekindle growth in the general trade sector, citing the industry’s disproportionate development in e-commerce and modern trade over the past three years. Gupta stated, “It will be an ‘and’ growth and not an ‘or’ growth,” indicating a simultaneous focus on both traditional and modern retail channels.
One of the significant challenges faced by kirana stores is the drying up of credit from distributors, impacting their ability to stock up on inventory. This, in turn, has led to a decline in inventory levels, affecting various FMCG companies, including Marico.
While modern trade saw a year-on-year growth of 19.5% in the September quarter, traditional trade, which includes kirana stores, experienced a more modest growth of 7.5%. The growth in traditional trade was influenced by a low base from the previous year, reflecting a 2% sales decline. According to Bizom, a platform tracking retail sales and kirana orders, the number of kirana outlets in October decreased by 3.4% compared to August, with a simultaneous pileup of inventory.
Akshay D’Souza, Chief of Growth and Insights at Mobisy Technologies, pointed out, “Inconsistent demand for Diwali is leading to excess stocking across kiranas and standalone modern trade channels.” This excess stocking has resulted in deep discounts for inventory liquidation, creating further challenges for kirana stores.
Distributors, wary of delayed payments from kirana outlets, are cautious about extending credit, particularly for low-velocity items such as personal care products. Despite the challenges, FMCG companies believe that a renewed focus on kirana stores will pay off, especially as consumer sentiment in rural areas is expected to improve in the next few quarters.
Executives from FMCG companies, including Marico, Dabur, Emami, and Bajaj Consumer, are fine-tuning their product and distribution strategies to revive sales through general trade. This includes launching direct-to-consumer brands in general trade, investing in expanding reach in channels such as chemists and cosmetic stores, and direct distribution to general trade in rural areas.
For instance, Marico plans to introduce its digital brands, such as True Elements and Plix, into the general trade, while Dabur aims to launch more affordable packs in kirana stores. Emami is extending some of its online brands, The Man Company and Brillare, to large general trade stores, and Tata Consumer Products is modifying its strategies to launch online products offline.
As FMCG giants adapt to the evolving retail landscape, their efforts to strengthen ties with kirana stores and tailor products for traditional trade are expected to play a crucial role in overcoming the current retail slowdown.