NEW DELHI/MUMBAI: The urban kirana is headed for a challenging Diwali, with general trade distributors noting a 25-30% month-onmonth drop in sales since July, as India’s largest fast-moving consumer goods ( FMCG) companies report steady surge in quick commerce sales simultaneously.
Some companies such as Dabur and Nestlé have hinted at correcting inventory at general trade, in line with changing consumer shopping habits in cities, though kiranas remain the biggest channel for FMCG.
“We are looking at recalibrating some inventory at general trade,” said Suresh Narayanan, chairman of packaged foods maker Nestlé, whose ecommerce sales hit a seven-year high in July-September. “Ecommerce sales now contribute 8.3% of our total domestic sales, with quick commerce accounting for 50% of that,” he said. During the quarter, the maker of Maggi noodles and Nescafé coffee saw its ecommerce sales grow 38%. “General trade is doing reasonably well… Ecommerce is going extremely well… All channels are important for us,” Narayanan said.
India has about 13 million kirana stores where FMCG products are distributed. These continue to contribute close to 85% of sales—particularly in rural markets and tier II-III markets.
Rural Balance
However, kiranas are fast losing out to quick commerce in big cities, industry executives said.
“Diwali sales are not catching up for kirana trade, and we don’t expect this year’s (Diwali) sales to match that of last year’s,” said a spokesperson for All India Consumer Products Distributors Federation that represents over 400,000 FMCG distributors.
“There is a month-on-month 25-30% decline in sales at kirana stores on account of quick commerce in cities where these platforms are operating,” the person said.
Zomato-owned Blinkit, Swiggy Instamart, Zepto, Big Basket-owned BBNow and Flipkart Minutes, which deliver essentials and groceries to customers’ homes within 10-12 minutes, have been growing and expanding their reach significantly, especially in large cities, for the last several months.
“The reason why quick commerce is doing well is because it serves a certain consumer shopper need – convenience,” said Ritesh Tiwari, chief financial officer at Hindustan Unilever (HUL). The maker of Dove soap and Red Label tea said in its earnings call that it is stepping up investments and strengthening its partnership in ecommerce.
“We have a segregated portfolio (for ecommerce), without any significant overlap to modern trade or general trade,” Tiwari said. “We have designed our portfolio and our promotional incentives to ensure we stay competitive in quick commerce. Even though it’s a small part of our total ecommerce business, we want to win in every corner of the market.”
While FMCG companies say they are splitting assortments by pack sizes, consumer preference and pricing to balance interests of kiranas, quick commerce and modern trade channels, the face-off between the former two channels has escalated in recent months.
QCOMM THE DIFFERENTIATOR
“Demand moving to quick commerce is an industry-wide phenomenon, and sales to distributors are billed according to their sales in the market,” said Tarun Arora, chief executive of Zydus Wellness, which makes Sugar Free sweeteners and cookies. “While we are seeing some pressure on small retailers and, in turn, on urban distributors, impacted by reduced growth in general trade due to quick commerce, the former remains key to the FMCG business.”
Some companies such as Dabur and Nestlé have hinted at correcting inventory at general trade, in line with changing consumer shopping habits in cities, though kiranas remain the biggest channel for FMCG.
“We are looking at recalibrating some inventory at general trade,” said Suresh Narayanan, chairman of packaged foods maker Nestlé, whose ecommerce sales hit a seven-year high in July-September. “Ecommerce sales now contribute 8.3% of our total domestic sales, with quick commerce accounting for 50% of that,” he said. During the quarter, the maker of Maggi noodles and Nescafé coffee saw its ecommerce sales grow 38%. “General trade is doing reasonably well… Ecommerce is going extremely well… All channels are important for us,” Narayanan said.
India has about 13 million kirana stores where FMCG products are distributed. These continue to contribute close to 85% of sales—particularly in rural markets and tier II-III markets.
Rural Balance
However, kiranas are fast losing out to quick commerce in big cities, industry executives said.
“Diwali sales are not catching up for kirana trade, and we don’t expect this year’s (Diwali) sales to match that of last year’s,” said a spokesperson for All India Consumer Products Distributors Federation that represents over 400,000 FMCG distributors.
“There is a month-on-month 25-30% decline in sales at kirana stores on account of quick commerce in cities where these platforms are operating,” the person said.
Zomato-owned Blinkit, Swiggy Instamart, Zepto, Big Basket-owned BBNow and Flipkart Minutes, which deliver essentials and groceries to customers’ homes within 10-12 minutes, have been growing and expanding their reach significantly, especially in large cities, for the last several months.
“The reason why quick commerce is doing well is because it serves a certain consumer shopper need – convenience,” said Ritesh Tiwari, chief financial officer at Hindustan Unilever (HUL). The maker of Dove soap and Red Label tea said in its earnings call that it is stepping up investments and strengthening its partnership in ecommerce.
“We have a segregated portfolio (for ecommerce), without any significant overlap to modern trade or general trade,” Tiwari said. “We have designed our portfolio and our promotional incentives to ensure we stay competitive in quick commerce. Even though it’s a small part of our total ecommerce business, we want to win in every corner of the market.”
While FMCG companies say they are splitting assortments by pack sizes, consumer preference and pricing to balance interests of kiranas, quick commerce and modern trade channels, the face-off between the former two channels has escalated in recent months.
QCOMM THE DIFFERENTIATOR
“Demand moving to quick commerce is an industry-wide phenomenon, and sales to distributors are billed according to their sales in the market,” said Tarun Arora, chief executive of Zydus Wellness, which makes Sugar Free sweeteners and cookies. “While we are seeing some pressure on small retailers and, in turn, on urban distributors, impacted by reduced growth in general trade due to quick commerce, the former remains key to the FMCG business.”
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