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Cooking gas distributors knocking at your doorsteps to supply Mysore Sandal soap or Dabur Basmati Rice is becoming a more familiar sight for Indians now. The platform is helping not just the oil marketing companies share a commission with their dealers but the FMCG companies which use the vast network of to directly sell products instead of stocking up at shops.
Though this is helping oil marketing companies that are always burdened with losses, to boost their traditional non-fuel retail platform , the cap on subsidised LPG cylinders and crackdown on diversion is impacting sales through LPG dealers. Domestic LPG sales dropped 1.8 per cent from September 2012 to January 2013, against a growth of 7 per cent same period previous year.
Take the case of Karnataka Soaps & Detergents Ltd, which sells Mysore Sandal soaps and agarbatis through Indian Oil Corporation’s Indane network and Bharat Petroleum’s gas distribution network, sales through the platform has come down by at least 20 per cent since last September when the cap of cylinders came. The Karnataka government-owned company had posted additional revenue of Rs 2.5 crore during the last financial year by selling through LPG dealers. IndianOil, the largest fuel retailer in the country, and its peer Bharat Petroleum Corporation have some 8000 odd LPG dealers across the country.
According to KSDL, while OMCs get an overriding commission of 4 per cent, dealers get a 7 per cent commission through the platform. “For small players like us, this innovative platform has helped a lot. It is like adding 2000-odd dealers who will do direct marketing for us. Though there is slug since the cap on LPG cylinders, we are expecting our sales to double using the network,” said C M Suvarna Kumar, Deputy General Manager (Marketing), KSDL.
“We have currently 6000 Indane LPG distributors across the country, which offer value added services beyond LPG cylinders to our customers, thus adding to our bottomlines,” said N Srikumar, executive director (corporate communications and branding) of IOC. IndianOil's non-fuel product portfolio under the Indane network also include kitchen appliances brands like Bajaj, Superflame, Butterfly, Ion Exchange water purifier and Jai Bro home fire extinguishers.
IndianOil, which has developed a strong non fuel retailing (NFR) in order to cash in on the 280 million square feet of retail space across the nearly 22,000 petrol pumps that it operates, were one of the first to go beyond the normal retail business. It recently tied up with Cafe Coffee Day, McDonalds and Dominos Pizza. It had tie-ups with Hyundai, Maruti, TATAs, Exide, Dabur, HUL, ICICI Lombard, Ferns and Petals and to Godfrey Philips for convenience stores.
While there were allegations that LPG distributors force customers to buy products through this channel, both distributors and companies deny that. “As per demand, our supply team provides these products at the doorsteps. The advantage for customers is that these products are sold below the market price and we never force people to buy it. Earlier we used to sell even ITC brands,” said Anup Ghosh of Agnishikha gas agency in North 24 Parganas of West Bengal, which is a BPCL gas dealer. BPCL too sells branded kitchen appliances like Butterfly and Hawkins, Basmati rice by Dabur and Hello, Edible oil brands like Fortune and Sun Flower, toiletries of HUL, Tea brands like Red Rose and Duncans and ayurvedic products by Dabur.
According to Srikumar of IOC, NFR revenue is going to improve rapidly in the coming years as the companies are yet to fully utilize the real estate space. . Though the NFR revenues from both retail outlets and LPG dealers as compared to the overall top line revenues clocked by the company will always be small, but they have the potential to scale up in times to come, given the opportunities that it provides , he said. The company is currently using space at only 5000 petrol pumps now for NFR business.
The OMCs are in fact following the global model where petrol pumps clock up to 40 per cent of their revenue earnings from non fuel retailing. "In India, however, NFR is still at a nascent stage, but it certainly offers a humungous opportunity to increase the bottom lines for all the stake holders. NFR contributes about 2 per cent of the total revenue of OMCs,” Srikumar added.
