India’s booming quick commerce sector is prompting fast-moving consumer goods (FMCG) companies to reduce sales to distributors in major cities and manage an oversupply of inventory at kiranas, or small neighbourhood retail stores.
Dabur’s͏͏ Supply͏͏ Restrictions:
Dabur͏͏ restricted͏͏ supplies͏͏ to͏͏ general͏͏ trade͏͏ in͏͏ September͏͏ due͏͏ to͏͏ increased͏͏ inventory͏͏ levels͏͏ after͏͏ organised͏͏ channels,͏͏ led͏͏ by͏͏ quick͏͏ commerce,͏͏ saw͏͏ “disproportionately͏͏ higher͏͏ growth”͏͏ in͏͏ recent͏͏ quarters.͏͏ In͏͏ an͏͏ earnings͏͏ update͏͏ on͏͏ Tuesday,͏͏ the͏͏ company͏͏ stated͏͏ that͏͏ high͏͏ stock͏͏ levels͏͏ were͏͏ impacting͏͏ distributor͏͏ ROI͏͏ (return͏͏ on͏͏ investment),͏͏ resulting͏͏ in͏͏ a͏͏ mid-single͏͏ digit͏͏ revenue͏͏ decline͏͏ for͏͏ the͏͏ September͏͏ quarter.͏͏ However,͏͏ it͏͏ expects͏͏ revenue͏͏ growth͏͏ to͏͏ normalise͏͏ this͏͏ month.
Retail͏͏ intelligence͏͏ firm͏͏ Bizom,͏͏ which͏͏ monitors͏͏ kirana͏͏ sales,͏͏ reported͏͏ a͏͏ 2-3%͏͏ stock͏͏ optimisation͏͏ in͏͏ chocolates,͏͏ up͏͏ to͏͏ 10%͏͏ in͏͏ personal͏͏ care͏͏ products,͏͏ and͏͏ 6-7%͏͏ in͏͏ homecare͏͏ at͏͏ general͏͏ trade͏͏ over͏͏ the͏͏ past͏͏ four͏͏ months͏͏ on͏͏ average͏͏ compared͏͏ to͏͏ last͏͏ year.
Adani͏͏ Wilmar’s͏͏ Shift͏͏ Towards͏͏ Organised͏͏ Trade:
Nearly͏͏ half͏͏ of͏͏ Adani͏͏ Wilmar‘s͏͏ sales͏͏ now͏͏ come͏͏ from͏͏ organised͏͏ trade,͏͏ driven͏͏ by͏͏ quick͏͏ commerce͏͏ in͏͏ major͏͏ markets͏͏ such͏͏ as͏͏ the͏͏ National͏͏ Capital͏͏ Region,͏͏ Bengaluru,͏͏ and͏͏ Pune,͏͏ up͏͏ from͏͏ 25-30%͏͏ a͏͏ year͏͏ ago,͏͏ according͏͏ to͏͏ managing͏͏ director͏͏ Angshu͏͏ Mallick.͏͏ This͏͏ shift͏͏ has͏͏ enabled͏͏ inventory͏͏ optimisation,͏͏ as͏͏ the͏͏ company͏͏ ensures͏͏ weekly͏͏ billing͏͏ and͏͏ stock͏͏ replenishment͏͏ across͏͏ all͏͏ outlets͏͏ to͏͏ maintain͏͏ freshness.
Organised͏͏ trade͏͏ also͏͏ includes͏͏ grocery͏͏ retail͏͏ chains͏͏ and͏͏ e-commerce͏͏ platforms.
Continue͏͏ Exploring:͏͏ Global͏͏ FMCG companies͏͏ boost͏͏ efforts͏͏ to͏͏ capture͏͏ India’s͏͏ expanding͏͏ market
Tarun͏͏ Arora,͏͏ CEO͏͏ of͏͏ Zydus͏͏ Wellness,͏͏ the͏͏ manufacturer͏͏ of͏͏ Complan͏͏ health͏͏ drink͏͏ and͏͏ Glucon-D͏͏ energy͏͏ drink͏͏ powder,͏͏ stated͏͏ that͏͏ the͏͏ shift͏͏ in͏͏ demand͏͏ towards͏͏ quick͏͏ commerce͏͏ is͏͏ an͏͏ industrywide͏͏ trend,͏͏ with͏͏ sales͏͏ to͏͏ distributors͏͏ billed͏͏ based͏͏ on͏͏ sales.
“Although͏͏ we͏͏ are͏͏ experiencing͏͏ some͏͏ pressure͏͏ on͏͏ small͏͏ retailers͏͏ and,͏͏ consequently,͏͏ on͏͏ urban͏͏ distributors͏͏ due͏͏ to͏͏ slowed͏͏ growth͏͏ in͏͏ general͏͏ trade͏͏ as͏͏ a͏͏ result͏͏ of͏͏ quick͏͏ commerce,͏͏ small͏͏ retailers͏͏ remain͏͏ crucial͏͏ to͏͏ the͏͏ FMCG͏͏ business.͏͏ Enhancing͏͏ distribution͏͏ efficiencies͏͏ may͏͏ involve͏͏ distributor͏͏ consolidation,͏͏ though͏͏ it͏͏ is͏͏ not͏͏ an͏͏ easy͏͏ task,”͏͏ said͏͏ Arora.͏͏ Over͏͏ the͏͏ past͏͏ year,͏͏ many͏͏ companies͏͏ have͏͏ lowered͏͏ margins͏͏ for͏͏ general͏͏ trade͏͏ distributors.
Vishesh͏͏ Dora,͏͏ chief͏͏ of͏͏ staff͏͏ at͏͏ Bizom,͏͏ noted͏͏ that͏͏ brands͏͏ have͏͏ already͏͏ implemented͏͏ stock͏͏ optimisation͏͏ measures͏͏ for͏͏ general͏͏ trade͏͏ channels.͏͏ “Preventing͏͏ over-stocking͏͏ through͏͏ technology͏͏ interventions,͏͏ along͏͏ with͏͏ promoting͏͏ specific͏͏ SKUs͏͏ in͏͏ both͏͏ general͏͏ and͏͏ modern͏͏ trade,͏͏ has͏͏ been͏͏ key.͏͏ The͏͏ personal͏͏ care͏͏ and͏͏ homecare͏͏ categories,͏͏ in͏͏ particular,͏͏ show͏͏ further͏͏ optimised͏͏ stock͏͏ levels͏͏ among͏͏ general͏͏ trade͏͏ stockists.”
“Brands͏͏ are͏͏ already͏͏ adapting͏͏ to͏͏ integrate͏͏ both͏͏ physical͏͏ and͏͏ digital͏͏ channels,”͏͏ he͏͏ said.
Quick͏͏ commerce͏͏ firms͏͏ such͏͏ as͏͏ Zepto,͏͏ Swiggy͏͏ Instamart,͏͏ and͏͏ Zomato-owned͏͏ Blinkit͏͏ have͏͏ asserted͏͏ that͏͏ their͏͏ growth͏͏ comes͏͏ at͏͏ the͏͏ expense͏͏ of͏͏ modern͏͏ trade͏͏ and͏͏ e-commerce.͏͏ In͏͏ an͏͏ August͏͏ shareholder͏͏ letter,͏͏ Blinkit͏͏ CEO͏͏ Albinder͏͏ Dhindsa͏͏ stated͏͏ that͏͏ the͏͏ company͏͏ is͏͏ not͏͏ taking͏͏ market͏͏ share͏͏ from͏͏ kiranas͏͏ or͏͏ value-driven͏͏ large͏͏ retail͏͏ chains͏͏ like͏͏ DMart.
“The͏͏ value-focused͏͏ items͏͏ offered͏͏ in͏͏ these͏͏ formats͏͏ are͏͏ difficult͏͏ to͏͏ replicate͏͏ in͏͏ our͏͏ business,͏͏ particularly͏͏ in͏͏ categories͏͏ like͏͏ staples,͏͏ where͏͏ price͏͏ sensitivity͏͏ is͏͏ greater,͏͏ and͏͏ we͏͏ lack͏͏ the͏͏ capability͏͏ to͏͏ sell͏͏ open͏͏ SKUs͏͏ like͏͏ brick-and-mortar͏͏ stores͏͏ can.͏͏ Most͏͏ kiranas͏͏ also͏͏ provide͏͏ personalised͏͏ commerce,͏͏ such͏͏ as͏͏ the͏͏ khata͏͏ system͏͏ for͏͏ their͏͏ customers,͏͏ which͏͏ we͏͏ unfortunately͏͏ cannot͏͏ offer,”͏͏ he͏͏ said.
Consumer͏͏ Behaviour͏͏ Shifts͏͏ Towards͏͏ Quick Commerce:
However,͏͏ companies͏͏ report͏͏ a͏͏ shift͏͏ in͏͏ consumer͏͏ behaviour͏͏ from͏͏ kiranas͏͏ to͏͏ quick͏͏ commerce.͏͏ Consequently,͏͏ quick͏͏ commerce͏͏ has͏͏ emerged͏͏ as͏͏ the͏͏ fastest-growing͏͏ channel͏͏ over͏͏ the͏͏ past͏͏ 6-8͏͏ quarters.͏͏ For͏͏ example,͏͏ biscuit͏͏ maker͏͏ Parle͏͏ Products͏͏ has͏͏ experienced͏͏ a͏͏ quick͏͏ commerce͏͏ growth͏͏ rate͏͏ of͏͏ 35-40%,͏͏ compared͏͏ to͏͏ 18-20%͏͏ in͏͏ e-commerce,͏͏ 12-15%͏͏ in͏͏ modern͏͏ trade,͏͏ and͏͏ 5-6%͏͏ in͏͏ general͏͏ trade.
According͏͏ to͏͏ a͏͏ recent͏͏ study͏͏ by͏͏ FMCG͏͏ sales͏͏ researcher͏͏ NielsenIQ,͏͏ 31%͏͏ of͏͏ shoppers͏͏ use͏͏ quick͏͏ commerce͏͏ for͏͏ their͏͏ primary͏͏ needs,͏͏ while͏͏ 39%͏͏ utilise͏͏ it͏͏ for͏͏ top-up͏͏ purchases.͏͏ Additionally,͏͏ 42%͏͏ of͏͏ shoppers͏͏ turn͏͏ to͏͏ quick͏͏ commerce͏͏ for͏͏ ready-to-eat͏͏ meals,͏͏ and͏͏ 45%͏͏ for͏͏ salty͏͏ snacks.
