 "General trade takes centre stage for FMCG companies")
Keen to ramp up its direct reach in the chemist channel, Dabur has been pushing its salesmen to frequent chemist stores across cities. This is a must for health care companies, says Dabur Chief Executive Sunil Duggal. The firm has already added 75,000 chemists to its existing base of around 150,000; total direct reach now is close to 225,000, according to Duggal.
Dabur is not the only firm that has been homing in on general trade, whose part are chemists, for the past few months. A just-released study by Tata Strategic Management Group, the consultancy arm of the $110-billion Tata Group, says most fast-moving consumer goods (FMCG) companies today are driving direct coverage in urban areas, to improve their sales. The move has come at a time when general trade has overtaken modern trade in terms of growth rate - for the first time in three years.
Pankaj Gupta, senior practice head for consumer & retail at Tata Strategic Management Group, says the reason for modern trade expanding at a rate slower than general trade is a cut-back in discretionary spends by consumers, besides a general slowdown that has seen brick & mortar retailers shutting stores in recent months.
The point is endorsed by G Chokkalingam, founder, Equinomics Research & Advisory.
"There is a deflationary scenario triggered by lower commodity prices. While this means our import bill is down, it actually doesn't augur well from a consumption point of view. That is because if commodity prices are on the lower side for a sustained period, the money in commodity suppliers' hands is lower. This impacts consumption. The result is that companies don't see the kind of sales growth they should. Retail has been hit by this, so modern trade has also slowed," he says.
In the past year, for instance, Reliance Retail has shut stores of its grocery chain Reliance Fresh. Aditya Birla Retail and Spencer's Retail, too, have made similar moves. Global giant Carrefour exited India, even as opposition to foreign players operating multi-brand stores continued.
"It didn't help that these coincided with the rise of e-commerce. Retailers have been busy focusing their attention on building omni-channel retail strategies, to counter e-tailers," says Gupta.
Future Group CEO Kishore Biyani says he will kick off his omni-channel retail plans with electronics. While the site is up, he says, not all features have been activated. That should happen over time and will also slowly, but steadily, involve more categories from apparel to grocery and FMCG.
As modern trade gears up for this action, FMCG companies are focusing their attention on the channel that is giving them higher growth - general trade.
Godrej Consumer Products, for instance, has a project in place to ensure the company's salesmen visit stores in urban pockets, hitherto serviced by wholesalers alone. "These are typically stores that don't give me a billing (sales) a week. But they are still relevant to me because I can push up incremental sales from these stores. My salesmen now visit these stores once a fortnight," says Sunil Kataria, business head (India and Saarc), Godrej Consumer Products.
Simultaneously, says Kataria, his firm is looking to drive sales throughput from existing stores (in general trade) by increasing frequency of visits to these outlets. "If we earlier had one salesman going to each store assigned to him in a certain area, we now have two going to those outlets with completely different sets of products. The idea is to optimise sales from such outlets," he says.
Firms like Hindustan Unilever, Marico, Emami and ITC are all following a similar strategy to ramp up sales from existing outlets, analysts tracking the FMCG sector say. The idea is to be able to make the best of outlets directly under them, even as they focus on improving overall direct reach.