Small & new Brands – Driver of 80% of Indian FMCG market

 

If you have ever noticed, how many small scale brand companies are involved in the FMCG sector in India? You will be surprised to hear that there are around 30000 small-2 brands of Grocery and consumer durables, footwear and clothing catering to the needs of 80% of the population in India but we are in light of only 20% of the corporates who rule the FMCG sectors. Some of them are HUL, Dabur, Marico, Colgate, P&G, Bajaj etc but they are feeders for 20% of the demand. It gives us space for a future where we might think there's still a big room to grow.

You will find that different brands have a presence in a range periphery and it goes to different 2 areas. According to market sources more than 10000 brands were launched during the COVID time in 2020-21 in different parts of the country. The momentum in the FMCG sector is still aggressive.

According to the survey by traders' body CAIT  above statement is validated in the  news article of Economics times.  Link given here : https://economictimes.indiatimes.com/industry/cons-products/fmcg/products-of-30000-small-brands-cater-to-80-pc-of-population-report/articleshow/90894928.cms

“Household products of over 30,000 brands operating at small and medium scale cater to a majority of the country's population, while only 20 per cent use such items sold by big corporate houses, a survey said. Products of Fast Moving Consumers Goods (FMCG), consumer durables and cosmetics from over 30,000 small and medium brands are catering to the demand of 80 per cent of India's population, according to the survey by traders' body CAIT. The survey was conducted on the basis of use of item including food grains, oil, grocery, personal cosmetics, inner wear, ready-made garments, beauty and bodycare, footwear, toys, educational games and healthcare.

"It's a myth that about 3,000 big brands of corporate houses, particularly in the FMCG sector, consumer durables and cosmetics Etc are catering to the needs of the people of the country. In fact, more than 30,000 small and medium but regional level brands are the largest contributor in meeting the demand of the people of India," CAIT (Confederation of All India Traders) said.

The survey said the demand of a vast majority is fulfilled by the products of small and tiny manufacturers sold in loose quantity.

Big brands are in demand among people of higher and upper-middle class due to extensive media and outdoor publicity and endorsements by celebrities, CAIT secretary general Praveen Khandelwal said.

On the other hand, brands of small manufacturers are sold through one-to-one contact between customers and shopkeepers, also through word-of-mouth among people of medium, lower-medium income groups and those belonging to economically weaker sections, he added.( Originally published on Apr 17, 2022 )”

 

New candidates are entering this segment, especially after the funding to varioius D2C Brands. Mamaearth and many other brands received a good amount of funding. Now, we can say that VCs are interested in investing money in companies where the future of private label brands is more visible and they can see 20x growth in terms of ROI.

Many more will come up with many newer ideas. Recently "One Dry Fruits Brand Happylo" has got good funding. Platforms like Amazon and Flipkart are providing great opportunity to brand makers to showcase their products to millions and even billions of consumers. This is the power of the platform.

Developing a distribution channel is going to be a challenging task for small and small brand owners as not everyone is able to find a place on the eB2C platform, so that they can eventually find a place in the kirana retailers. Again it is a huge task to provide the self-space to their products at Kirana Stores. Retailers are also facing the problem of space at their stores. Every day 5 new brand sellers approach them. There is no doubt that the products are good in terms of packaging and quality but without finding proper retail location one cannot think of bringing it to market for the consumers. And the retailers have limits on the amount of space in the store so that they can entertain or not.

More than 70% of new brands are off the shelf within six months of launch, or at most one year. And those who do manage to make a living are struggling to stick to the shelf space at those retail stores.

Many small brand owners are not in a position to allocate huge market budgets or depute a skilled sales team or expand out of the region in a short period of time.

The other main issue before the new brands is to find willing distributors for their products/brand as the distributors are not interested in selling the new products on credit. Margins are also thin as competitions also go stiff.  Retailers want new products on credit terms but if distributors are not able to provide it, one cannot expect that there will be coverage in the target market. If somehow they hire distributors in the respective area they are not able to sell them to the retailers due to lack of FOS (feet on the street) skills and low payment and in lack of incentives or motivation.

Things will go on and off but it is time to fix the retail ecosystem by giving it a centralized distribution system backed by robust IT platforms. It is time to consolidate the supply chain and make the best use of capabilities and bring operational efficiencies, then small brands would get a common and unified platform for their products and would be able to expand into new areas with the help of aggregation. Things will progress for the better but in the way we do things.

The time is coming for those brands where you will get a small brand which will have a national presence. He will no longer be called a regional player.

We are working to deliver solutions to food and grocery manufacturers and connecting them to a large network of retailers through a one-of-a-kind block chain solution and hyperlocal distributions channel

Written by : Balwant Singh Rana: 18.05.2022, Jaipur

 

 

India can feed the World - A dilemma of Ban on Wheat Export

"India is ready to feed the world" PM Narendra Modi said on Tuesday, April 12, 2022.

We should trust the said words of PM Modi. It really matters a lot when Modi is saying these words and the world is going through a food crisis. On the other hand, the food crisis in the eastern part of Europe and Africa is getting worse day by day. Ukraine's major food supply chain was severely stuck after Russia's invasion of Ukraine. The impact of the war is huge on wheat and edible oils, although many other commodities are prominent, but wheat is one of the major commodities that has caused demand collapse across the world.

Ukraine and Russia together contribute 30% of the world's wheat production.

Therefore, the huge share in the supply chain is now clearly visible everywhere. At the same time, India being the largest producer of wheat has the potential to feed the world but there are other internal issues where the greater responsibility is the issue of India's food security. However, our PM shared his views with the world that India has the capacity and capability to feed through our natural agricultural produce and in other words can supply them to feed on a large scale.

At the same time, it was decided by the Government of India to export wheat and ensure that the gap in the supply chain of wheat caused by the Russian/Ukraine War was quickly filled and to take the opportunity to dominate the international market.

This has given us an opportunity to show our strength to the developed countries.

Undoubtedly more than 7.85 million tonnes were exported during the financial year 2021-22, and ~1.1 million tonnes were exported in April, 2022.

It was stated that India could export 10 million tonnes of wheat by the end of July 2022. Things were going well, the Kandla port became congested due to heavy traffic of ships and thousands of trucks outside the port. Kandla has a strategic advantage due to its proximity to the western port and wheat producing states.

The direct export of wheat has given a big support to the prices, farmers are getting better rates above the MSP. Things were in a straight line either way. Once the Indian government opened up the export of wheat, paving the way for the world where things were coming from India in the best possible way. Private companies started signing and selling to foreign buyers. You may be aware that due to the decision of the Government of India and the priority loading at the load port, exporters of other commodities such as wheat flour, rice and other commodities have to wait for a month for the birth of their vessel. In such a situation, they are facing heavy losses, why only because of wheat and that GOI made on their priority list.

On can compare the prices with MSP. Base selling ex-warehouse rates were around Rs.2250/Qntl during April, 2022, which was F.O.R. Kandla Rs.2550~ per quintal.

More than profit to individual exporters it was a pride that we are exporting Wheat. India is exporting wheat where we are going to fulfil the hope of countries where food crises is on the edge. On the other hand, this will give supports to the ambitious words of PM Modi which he given to world that India is going to feed the world.

But, in between something happened unexpectedly,

On May 13, 2022 the government banned all private wheat exports with immediate effect. It was not expected that GOI will take this action without

consulting with the trade bodies. 

My concern is why Govt. of India took this kind of decision. Is there no worth or importance of Indian exporters who brought tons of value of wheat at Port for loading to their buyers as per the policies of DGFT.

Is this a decision that only hurt exporters, transporters and shipping agents? Is not this hampering image of our country?

Still 1.2 million-ton wheat of 2700~ crores is lying at various port areas as on date or some are saying 2 million ton stocks, however exact figures are not available on public portals or even APEDA has nothing to share. Amazing things. At this age of technology, we don't have the exact stocks which are moved for export and lying at port areas. Unexpected things are making the noise and hampering our image. 

I have few ethical questions asking to Concern Ministry of GOI:

• Why Wheat export is allowed without evaluating the internal facts?
• What will happen to nice words of PM Modi which he delivers to world that India will feed the world?
• Without consulting or going through the facts why Ban is imposed on Wheat export?
•  Who cares about India’s image in WTO?

I understand that first of all we should think about ourselves, our country, but also we should think about our business houses/our exporters and the people in this ecosystem who have done this through the circular of the Director General of Foreign Trade. Money was spent on one word. , For those people, the wheat export circular was not from DGFT, it was from PM Modi "when he said that India is going to feed the world"

I request the concerned Ministry to look into the matter and before taking any further steps, request for exemption to those exporters whose stock is lying in port warehouses and are ready to ship. Most of the contracts are done on CAD basis, so they will not be able to produce LC at this time. However, such hasty decisions by the Government of India will certainly bring disrepute to our country, our business practice and trust.

Written as a commodity analysist and trader by me,