Retail-led growth

While the FMCG sector continues to grow at a faster clip quarter-on-quarter, industry watchers have a reason to believe that the growth will be higher over the next year.

While a large part of the incremental growth has been linked with a buoyant economy and the agricultural sector doing well, the retail boom will also contribute significantly to this growth.

While modern trade may still not be a big contributor to the overall revenues, the sheer pace of growth will lead to a substantial increase in volumes.

Deepesh Garg, assistant vice president, Avendus Advisors, said that globally, the first time inventory of a retail outlet makes up about 35 per cent of its annual stock requirement.

The rate at which modern trade outlets are coming up in the country, this first inventory in itself would contribute significantly to the overall volumes of consumer goods companies.

Though modern trade contributes only about 5 per cent of a FMCG company's total sales, companies are seeing these outlets as a great way to communicate with the customers and push higher end and innovative products which may not necessarily work in a kirana outlet.

Companies like HLL are also investing in upgrading the smaller outlets by branding them "Supervalue" stores and offering special deals to consumers shopping there.