Aug 26, 2012

Layman's prediction for Staples in brands & Private Label and its Future

Indian Retail is going through a greater magnitude which is driving it through Kirana retailer's route to organized retail and further online platform. Based on my few digging in major 7 cities where I have personally seen how things are taking shape in various retail formats. One thing drags my attention to a serious development that starts with the big box retailers. Experienced from our past, the retailers and how in earlier days they used to sell merchandise from their shops.  

80% of products were sold loose, mainly all staples were loose. Except for a few national-level brands in Food like MDH, Everest, ITC, biscuit mfr, bread, and cookies, etc but the rest of all bulk staples have unorganized practice and being sold in loose form.

Going to Khari Baoli and Naya Bazar in Delhi was my routine so for me correlating things with developments going in the West was something intolerable. But, it has started invoking me to dig more about the packing of food products and bring them in the stream of Indian Kirana Retail.  It took me more than 7 months to envisioned the future of Private labels in food staples.  

Again on the investment front, I have seen that whether producing private labels will attract foreign investors or they will find it lucrative. 

Why this,  made me so specific to think about it and how it will take shape in coming days>

Let's put some lights on the present condition of Staples being sold in the market, retail stores, mandies etc. 

Source of Food:  All food items are originated from Agri produce, produced by the farmer and making sweat more lime so that we can get the things easily from our nearby stores. The journey starts from Farming Agri produce in a field. A farmer collects all its produce and travel to sell to a nearby APMC mandies. Mandi is an aggregator of local traders who buy from farmers at a very low cost, further adding semi processing cost elements, their margin etc. and sell to the manufacturer.  

The manufacturer produces identical products from the raw material like Sugar is from sugarcane and Rice from Paddy.  Finished products like main staples - Rice, Sugar, Oil, Wheat, Flour, Spices etc packed in bulk packaging and then send to Mandi traders, Wholesalers, Distributors. 

Retailers buy from Distributor, mandies and sell in loose form as per the requirement of the consumer.  during the whole process, bulk pack start from Mandi to Retailer where the idlest situation for products happened when it is lying in the retail store. There is no hygiene at all and the way it is being sold there are lots of health and economic issues. 

But on the same hand when we visit a organized retail store like going to Walmart, Metro, Big Bazar, More and many more things are positive in terms of hygiene and mostly found packed either in a plain pouch or in their private label. 

All such differentiation between a small retailer and big-box retailer is just a hundred feet distance, is this not an illusion? or it is not a matter of surprise?  So, Mount and Valley in the same vicinity. but it is part and partial of life and we continue our journey. from the same locality, there was such a big difference. I have seen small shops where poor consumers come to shop. I think, most of us who asked themself, retail experts, even do not know how a poor consumer buys their daily needs. 

I have stayed more than a week in different-2 cities including Bangalore, Chennai, Hyderabad, Raipur, Indore, Ahmedabad, Mumbai, Kolkata, UP's Meerut, and Lucknow, and few cities in Punjab there was no big difference in the status of a small Mom & Pop Store ( Kirana Retailer).  I have seen how a poor consumer approach a retailer for his needs.  He asked for weighing for Dal for Rs.10,  100 g rice, 50-gram sugar, oil for Rs. 5 and 10, and in this way buy almost all main staples under 100-150.  

This kind of comparison made me unrest, troll me all day and I start thinking why we can not pack a small size like a shampoo pouch is available in Rs.1 so why not we make available Dal even in a pack of Rs. 5/-.  Sugar for 10/-  etc.   Is hygiene is a legacy of the middle class or high-income group or rich people, whether available staples should not be packed even for the poor? 

It was a small thought but my entrepreneur mind made its billion-dollar business idea.  Keeping in mind the huge population of India where 70% are living their livelihood below a normal standard life. 

I start analyzing things from all inputs I get from various sources and finally start predicting that after 2014 or onward there will be a big change in the packaging of food products.    A 500 Billion grocery market of which 40% is staples need that kind of space. 

further, I have seen that consumer is also welcoming this move that they will get food in clean, hygienical manner, and even Govt is in sync with Fssai department to monitor food safety and ensure that maximum products will have a bright future in this segment.  When food staples come in packaging, it would be easy to fix responsibility by the food safety department and they can control adulteration in Food. 

On the other hand, the modern trade practice of FMCG brands is also going to hamper as most of the big box retailers started replacing various products from its private-label brands. The future group already started doing this, Reliance Fresh also started and all have a keen interest in this practice. For all big box, private labels are revenue and margin booster. Future group is projecting 20% revenue from their Private label in the coming years.  It is a big support for them. 

On the other side, MSME is going to start various incentive plans for manufacturers, various EPO, FPOs, PPC, and Cluster planning is going on to give direct supply chain from Farmer to Fork.  Lots of Developments are there at MSME level. 

Just check out?  following stakeholders in the retail ecosystem is aligning themself for the storm (Products). Products and products only. 
  • Players from overseas > a greater interest in the Indian food sector,
  • Local Players and regional players are going to give finest competition to all national level FMCG companies.
  • Startups
  • Investors
  • Business Families
  • NBFC  
I am predicting that after 2017  investors will infuse a heavy amount to promote startups and manufacturers who are going to develop food products in consumer packing. Create Value first - Valuation is a by-product that will help you to create wealth for a successful business venture. 

Future is there in private Label>

"Retailhaidetail" is my punchline where things should go in detail. 

Be in touch and write to me about your own thoughts about Indian retail. Are you okay with my above thoughts?

Writere : Balwant Singh Rana
Aug,2012, Delhi

Freatured Post of the Day

बड़े बड़े रीटेल के कारोबारी भी नहीं हिला पाए किराना व्यापारियों की नीव।

राजस्थान पत्रिका के 11.3.2023 के अंक मे प्रकाशित ये लेख यह  बताने के लिए काफी है की छोटे व्यापारी चाहे वे किराना के हो या और दूसरे रीटेल फॉ...

Must Read

You will find variety of Write up which shall be useful to every one . A knowledge centre for all.

Information given in this Blog is quite simple and in a very laymen style so easily understandable to all readers.

You can contribute your feedback to these bunch of information.

Contact Form


Email *

Message *