Why Future Group is breaking the age-old rules of the retail game

By taking its labels into general trade, the retailer has upended the system it has been a part of, but also plugged into the future of shopping

In the last few months, Future group, which began the modern trade revolution in India, has been silently taking some of its private and joint-venture brands into general trade. For many, this may seem counter-intuitive, given that modern and general trade are competing distribution channels. But look closely at the shopper, who wants everything everywhere, and Future’s actions do not seem as outrageous.

Traditionally, fast-moving consumer goods (FMCG) companies have separate distribution strategies for the two channels. And modern and general traders have stayed off each other’s turf, to prevent cannibalisation of sales. So what drives Future to blow up age-old trade practices?

The answer, say industry executives, lies in the group’s desire for better visibility and brand recall, and a wider base of consumers.  While modern trade has grown steadily over the last few years in India, it still contributes around 10 per cent of sales to FMCG companies. General trade including kiranas, neighbourhood stores and paan shops contribute the lion’s share at 88 per cent. E-commerce contributes 2 per cent. 

As the demand for convenience grows, says Arvind Singhal, chairman, Technopak, consumers are less likely to be loyal to any particular distribution channel. “Shopping habits are changing drastically. Buyers are available at various sales points. This could be online, offline or a combination of both. Retailers are realising that limiting distribution to their stores may not be the right way to go as the market gets competitive,” he says.

A Boston Consulting Group (BCG) report on retail in India says that organised players will increasingly have to adapt to a new normal as consumers grow savvy, suppliers become powerful and competition from newer channels such as e-commerce increases. 

By 2020, BCG says, nearly 400-500 million retail users in India will be digitally influenced in some way, implying that the medium would play a pivotal role in the buying process. 

Future group is preparing for this new reality by becoming the preferred delivery partner for Amazon Prime customers. Its flagship Big Bazaar stores would ensure delivery within two hours in multiple cities, the group said recently. A pilot is being run in 18 cities right now.

The group is also planning to work with Amazon, which has picked up a minority stake in Future Retail, on various other fronts to improve distribution and sales. Even as the group reworks its engagement model with competing channels, it is focusing keenly on general trade, said experts.

Future group's founder and chief executive officer, Kishore Biyani, said that all its private brands have been conceptualised to “sell everywhere” . For him, the category labels do not have to be tied to the apron-strings of the mother retail brand. He says, “25-30 per cent of our business already comes from stores outside our system. We do not see a problem with this. Our strategy is to make our brands more visible outside our stores.”

Visibility is also the reason why it recently took Dreamery, a dairy brand promoted by the joint venture between Future Consumer and New-Zealand-based Fonterra, into 3,000 general trade outlets. This has come soon after the national launch of Dreamery in Future group stores this June. It is also pushing more products into general trade, including those from a joint venture with the US-based company Hain Celestial. Terra Chips and Sensible Portions from the JV are now available in all stores and Biyani said that there were plans to expand its presence quickly. 

Future group sources say the conglomerate is eyeing at least 32,000 general trade outlets in the coming months for both Dreamery and Hain Celestial products, as it prepares to take on bellwethers such as Hindustan Unilever, ITC, Nestlé and Amul on their turf. Further expansion into general trade, they say, will come in phase two of the launch of these brands.

Some of Future’s own labels such as Tasty Treat, Kara and Desi Atta have also been taken into general trade recently and are expected to increasingly find more space on shop shelves. In the coming months, there are many more brands from the Future stable (over 20 according to sources) that will find their way into the kirana universe, which may well encourage other retailers to do the same.