Category: India

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Business Food India

The Remix Effect

Everything a Remix ?

Canadian film maker Kirby Ferguson shot to fame with his 2010 documentary that compared creative output over the years and claimed that it was virtually impossible to create something completely new without borrowing, copying or being inspired by existing material.

Hence his suggestion that “everything” was remixed.

Now whether you agree with that, or not, is up to you.

This story, however, is about a famous television commercial that was remixed. Not just once.

And of a few others that tried the remix approach.

Branding A Commodity

India’s National Dairy Development Board had successfully turned around the fortunes of its Dairy industy. By the early 1980s, India’s twin challenges of milk shortages and imports were history, and Amul wasn’t just a famous brand of milk, it was a sign of confidence, and a guarantee of quality to millions of its consumers.

The NDDB had achieved the holy grail that all players in the commodity space aspire to – they’d successfully turned a “boring” staple into a flourishing brand.

And it was this success that fueled their ambitions with another household category under their umbrella.

Cooking Oil.

Agricultural subsidies had helped keep NDDB’s brand – Dhara’s (Stream / Flow) prices low. But they’d also given the brand a distinctly “budget” air.

However, India’s post 1991 entry into the global economic playground meant that government’s tap would eventually be turned off.

And when prices eventually increased, shopper perception couldn’t reconcile the premium with the brand’s “down market” image.

Which resulted in both volume and share losses.

So the NDDB tried to replicate their Amul playbook with oil, and the famous “Jalebi” ad of 1996 was born.

The “Jalebi” Files

The ad featured a little boy running away from home because he’s been at the receiving end of many a ticking off, thanks to his proclivity for getting into trouble. A kindly postman persuades him to reconsider by telling him that his mother is making his favourite “Jalebi” sweet. All ends well with the postman safely bringing him home.

The ad received much love – for both its storyline and the cute protagonist, who went to act in a few movies.

I do remember being surprised at how he’d managed to evade another scolding for having attempted something that harebrained !

Nevertheless, the ad worked.

Dhara’s sales rebounded. And all was well.

Many years later, while thumbing through David Ogilvy’s eponymous book on advertising, I couldn’t help but wonder at this film’s similarities with pictures of another very old ad that stared me in the face.

Remix # 1 : The Hovis Ad

Hovis Bread – Ad film stills – Source : “Ogilvy on Advertising”

Debuting on British television during the late 70s, this film featured a boy running away to London from home with only a box of sandwiches for luggage. A kindly postman takes him back home after telling him he’ll need many more for this very long journey.

Little runaway boy – friendly postman – rescue based on a food premise – there are too many similarities to suggest anything but that the Dhara ad of 1996 was a “remix” of this one.

Remix #2 : Uber Eats

By 2018, many brands had realized the power of nostalgia and its multi generational appeal. Uber Eats chose to remix the ad from 1996 to “leverage” both.

Screen grab – Uber Eats Ad – 2018 – featuring the grown up kid from the original 1996 “Dhara” ad

Based on a similar premise – disagreement – runaway friend – food changing his mind (ordered on Uber Eats), the second remix was probably not as impactful (IMO), because what seems cute on a kid may not translate well onto an adult.

Epilogue

Its not unusual for ads to be remixed – entering into new markets often calls for “glocalizing” existing creative ideas – One prominent example of that is the Michael J Fox – Diet Pepsi film remade by PepsiCo India into the Aamir Khan – “Got a Pepsi” TVC.

Michael J Fox – Diet Pepsi – 1987 ad – remade with Aamir Khan into a Pepsico India TVC in the 90s

Brands may also feel the need to update their “classics” to align them with a newer social context. A famous (and debate inducing) example of such a remix was the Cadbury India film in which the newer version reversed gender roles from their 90s “Dancing Girl” film.

Tricky to pull off, it is much harder to recreate the impact of the original while attempting a remix.

And that probably makes the Hovis – Dhara remix and its subsequent reincarnation a twice born rarity !

Further reading :

The Dhara Ad Story : https://economictimes.indiatimes.com/lesser-known-stories-behind-the-20-year-old-iconic-dhara-jalebi-ad/articleshow/55683572.cms

Nostalgia Redux : https://theprint.in/features/dharas-jalebi-ad-from-the-1990s-still-means-home-and-family/421624/

The Pepsi Ads :

Michael J Fox : https://www.youtube.com/watch?v=H_qykQWQgsc

Aamir Khan : https://www.youtube.com/watch?v=kw7lMtUks4Y

The Cadbury Ads :

Girl : https://www.youtube.com/watch?v=e7JATezA1nY

Boy : https://www.youtube.com/watch?v=z_OtC06ndUE

The Dhara ad : https://www.youtube.com/watch?v=nhzGDj31CVE

Categories
Food India

Maggi & Memories

To the Joy of Comfort Food...

We’re currently in the throes of a life changing experience, as we start afresh on Canadian shores.

While the thrill of the new keeps you going on most days, there does come a time when you long for a little bit of comfortable familiarity.

A refuge, where you momentarily relax, recharge emotional batteries, and resume your tilt at new windmills.

Food, in my experience, provides this succor, maybe even shelter.

That’s probably how the term “comfort food” came into being.

Finding Forrester…er.. Food.

While some wits have considered Canada to be an extension of Punjab, ground reality is a little different from this wishful perception.

Yes, Brampton does have its moments, but getting there by public transport is by itself good reason to remain at inertia of rest.

The food ranges from awful to pretty good, and success is only likely when you’ve Googled, planned and executed it like a military mission.

Take out or home delivery is constrained by budgets & sometimes, by conversion arithmetic.

Even if that weren’t the case, its not really easy to find something you’d easily relate to, for the flavors and spices have been adapted to suit the local palate and are suitably mild.

So where does a newly landed immigrant turn to?

Trawl the supermarket shelves. Hope to find something that makes up for the lack of other options.

Aimlessly wandering through aisles with arrays of mind boggling options, I had all but given up when I chanced upon a stack of Maggi.

On Sale ! 26c a pack (approx Rs 13) – Whoa. It says its a product of India !

Imported – With Indian spicy flavour !

All boxes checked – Truly a happy day indeed !

That was when the floodgates of memory opened.

Much Ado About Maggi.

Maggi and I have an enduring, one way relationship

It began when as a seven year old, I was hooked by the taste of the Capsica flavour (yes there was one then).

The bond grew stronger when like many other kids my age, I cut out the 2 minute noodles label, mailed it to the company and got enrolled in to the Maggi club.

They gave you a shiny metallic badge (see following pic), which quickly became an unofficial part of the school uniform. For the entire grade had signed up !

They also organized a fiercely contested school quiz. I remember insisting on participating in one of these, while ignoring a bout of high fever with the help of medication.

It was sad not winning the branded school bag that day, but the principal, Mrs Simlai, more than made up for it by giving me all the packets she’d received !

The first tentative steps into the world of cooking happened with it.

It soon became a regular fixture on the monthly shopping list.

Started to appear in school lunch boxes.

Also became the occasional dinner at some friends’ homes ! (a pleasant surprise, which upped their parents’ cool quotient 🙂 ) 

The other flavors bowed out to the sheer volume of Masala eaters. They did make a comeback later, but fizzled away soon.

Around 1997-99, someone decided that innovation was the order of the day, and changed its taste and formula.

All hell broke loose. Maggi didn’t taste good any more. The shop owners got earfuls of anguished feedback.

I guess sales would have declined, for things recovered eventually, and the usual, familiar formula was back on shelves.

College introduced me to delightful culinary variants like butter Maggi, Schezwan Maggi and egg Maggi. And unusual times of the day / night to have them.

Any opportunity to sample a new variant was taken up earnestly, at any time of the day. Living in NOIDA after graduation meant spending precious money at the Nescafe outlet in Sector 18.

The story continued during post graduation and of course, well into the job. Phone numbers of Maggi entrepreneurs were saved to ensure desk delivery. Places that served great variants identified and frequented. During this period, I also tried its various competitors like Top Ramen, Yippee, Cup Noodles, and Wai Wai. They have their own tribes of loyalists, but Noodles = Maggi as far as a large chunk of consumers is concerned.

As if this weren’t enough, I remember waking up hungry after a pretty hectic evening of partying at the Oktoberfest in Munich, and dashing to the grocery store nearby, for yes, you guessed it right.

And then one day, came the lead in Maggi controversy. All hell broke loose.

“ Naah, that can’t be. We’ve trusted it since so long”, someone said.

“I’d be full of lead by now ”, another opined.

“Maybe I am – in the brain”– I said to myself.

Obtaining Maggi became a cause to celebrate. Crafty entrepreneurs started to sell it in black, but they too ran out of stock.

Anyway, normalcy, and with it, my cherished pack of noodles eventually returned to shelves. A memorable occasion, worthy of the hype and celebration !

All went well from there on, till we made this move.

Things are looking up, and now that I have discovered where to find my favorite comfort food, all will be fairly right with the world !

As my kid grows up, there are days when she asks for her version of butter Maggi. I am not sure whether that’s the right thing to do, but I hope she enjoys it all the same, and goes on to acquire her own collection of Maggi memories.

For a hot, reassuring bowl will always be two minutes away !

PS : Thank you to the teams which launched, built and run this brand to the day – and to those who brought it to this market. More power to you !

#brand  #Maggi #India #Canada #immigrantlife #food

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Business India

Re Learning Grocery Shopping

I wrote this a few months after moving to Canada from India.

I believe this may still be relevant, especially to newcomers.

Having recently moved to Canada from India, we are still in the unlearn / relearn phase in quite a few aspects of life. Grocery shopping for starters. Presented here a few “learnings”…

  1. Wear your sneakers / walking shoes

Wondering what that has got to do with shopping ? Well, quite a lot.

That is because the average store size here is well, quite large, compared with what we see in India. Dominated by the supermarket / convenience formats, the average Indian store is around 3000 – 5000 sq feet.

A mere 10% of the smaller Western supermarkets !

Add to the mix new store layouts, more navigation and possibly many iterative trips – well, a pair of good walking shoes are your best friends – and maybe a bottle of water too !

2. Start reading the signs

Since we weren’t the first set of shoppers to be dazzled by the store sizes and layouts, the stores had put up signs that help people find the way around. But that is just one piece of the puzzle. Old habits of looking at shelves, comparing products, checking out assortments, planograms and displays meant that your’s truly took a while to register their presence. Also, unlike India, there aren’t too many employees on the floor to ask directions from.

Of course, now I am a semi-pro, but, please learn from my mistake !

So, look up and read the signs… (reference image from the internet)

3. BYOB – a.k.a Bring Your Own Bags – because like in India, they’re charged. And its good for the environment

4. Carry your quarters : No I am not alluding to the measure of liquor serving popular back home. 25c coins are required to unlock shopping carts at some retailers. Don’t be alarmed, you get it back !

5. The Voyage of Price Discovery

Having negotiated a contract or two, I had developed a set of reservations about the Maximum Retail Pricing regime back home. Simply put, every SKU in the store carries a manufacturer ascertained printed price. It is believed that such a system will prevent over charging and keep prices in check. However, it starts to hurt when you’re negotiating a mark down margin on the sticker price. Also, since MRP doesn’t change frequently, balancing discounts with profitability becomes a tight rope walk.

That said, it was a little disorienting at first at not being able to realize what the right price would be for a particular product. Prices for the same branded goods vary across retailers – because like the brands they sell, each retailer also strives for different competitive positioning, and prices goods accordingly. This makes it even more confusing at first. The key to solving this riddle lies in not taking the printed price at face value (something which was a given earlier, and a slightly harder instinct to shake off), and always take a look at the information which the retailers provide themselves.

Which manifests each week in the form of a printed flyer, delivered right into your mailbox.

This helps you plan your shopping basket smartly. The Indian equivalents were the full page newspaper ads announcing sales, or the Metro Mailer, but these are quite different in scope and application. There is also an app which hosts e-flyers, but browsing it becomes a little tedious.

Some retailers also offer price matching – if you find a cheaper price on a competitors catalog, they match it – no questions asked. Typical caveats are restricting the number of products, and ensuring that the competing offers are from the same time period. That said, this is a good way to balance the basket and not make rounds of too many stores for grocery shopping !

5. The visual experience

Stores here are a visual delight to explore. Despite being packed with large assortments, it seems that the in store visibility norms are much more stringent and enforced. Neater, cleaner layouts (ref the banner picture), which are easy on the eye – and a lot of constraints for channel marketers (guilty plea here) who excelled in designing creative, “clutter breaking” ideas previously!

6. Self check outs & Wave pay

Stuck in a slow moving queue (don’t they all feel slow moving?) with only two items to pay for. Well, there is help at hand. Save your time and go to the self checkout. Scan the bar codes, loyalty card and use your Wave pay card when prompted.

Side note : I still feel a little jittery using the wave pay option – but it is reassuring to know that the upper limit on these cards can be capped basis individual comfort levels- which is a relief !

Summing up : Letting go of older, established mental models and building new ones has been a mix of emotions in varied measures. That said, the contrasts between two retail environments provide a fertile environment for observation and generation of new ideas. Worth the fun, for sure !

#retail #grocery #shopping #India #Canada #immigrantlife

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Business India

Gloom and Doom…Or Not…

Hello Hello…for all of you who may have mistakenly happened to chance upon this blog..

Today’s post..one that emerges after a long-ish interval, is slightly darker in tonality…

The landscape has changed so much that its difficult to imagine the amazing so called short sightedness of my own views of a year ago.

And pray, what is it that has changed so dramatically, which has forced me to examine my own views about modern retail so dramatically.

E-commerce, in one word.

The rise of e-commerce in India has been spectacular, to use a tired adjective.
Flipkart, Amazon, Snapdeal, Jabong have been the key players in the “general merchandise” or the “something for everyone” space.

Niche players like Zivame, Fabfurnish, Babyoye  & Lenskart have coasted over their initial teething phases and are now attracting global investor funding, with the ambition to become part of the daily existence of their shoppers.

So where does the rise of e-commerce leave our good old brick and mortar retailer players..

In a very tough space, honestly….

The only category that remains fairly unaffected today by the ecommerce onslaught seems to be FMCG – though that too is increasingly looking like a fortress under attack – the insurgents being local portals like Localbanya et al.

Modern trade/organized retails faces high barriers like constantly increasing overhead costs (manpower, facilities, rentals et cetera). E commerce has a lesser set of variables to deal with.

Ubiquitous internet access means more power to the shopper – who can now postpone the purchase “impulse” for a better deal from a dot com retailer. And when I, as 30+ individual was able to make this behavioural change, I am sure the younger generation will find it a way of life.

Add to this the convenience of home delivery, avoiding the parking and traffic hassle, options to pay in EMIs, means that suddenly, high margin categories like apparel, consumer durables, and electronics suddenly face solid competition from the e-retailers.

Such has been the impact of this threat that leading players like Sony and Lenovo have issued advisories and restricted warranty benefits to online purchases, amidst increasing resistance from the traditional dealer channel on pricing (online prices in a large number of cases being lesser than the landing rates of traditional retailers)

It is a convenient armchair theory that India will go the way of the mobile phone in this space. Though I don’t have exact data, I remember from my telecommunications engineering class that India had one of the lowest tele densities in the pre mobile era. Within ten years of my engineering graduation, it turns out that India has leapfrogged a large number of economies on this parameter.

With a bleak foreign investment prospect, increasing pressures on profitability, and a dynamic competitive environment, I feel that a large chunk of modern retail is headed the way of the pager…an equipment seen only in the earlier seasons of House MD !

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Business India

From the Shoulders of Giants – Other Views on MT

Not posting any major stuff today – just a few links discovered after googling “Modern Trade blog” – (alas, this one still does not feature in the top two pages even now !! ) 

This one shares an overall perspective on MT and its evolution. It also shares a Technopak estimate of how MT is expected to grow in the next 5 years. I sense that Technopak has taken a quite a punt on the MT contribution to retail environment in 2018. Its been some time since the FDI bill was passed in whatever distorted form, and there does not seem to be much enthusiasm in the industry going by the lack of announcements of either new entrants, or new partnerships. Its analysis of the 2008 and 2010 years also seems retro fitted basis actual events. So, my take – highly optimistic number – slim chances of materializing. 

The other one here is possibly an answer to why the Technopak number may turn out to be the aforementioned punt. It narrates a shopper’s comparison of her experiences at a neighbourhood kirana vis-a-vis the modern trade supermarket, and could, possibly, hold a nugget of insight – the shopper will  not  compromise on convenience !! It also brings to mind David Ogilvy’s famous words – “The consumer isn’t a moron; she is your wife”.  And I am pretty sure there are people in the industry who have already realized this, and are shaping their organization’s strategy accordingly.


Lastly, I loved Mr Nitin Paranjpe’s candour and awareness of HUL as an organization, when he makes a few observations on the importance of modern trade and how HUL adapted to it – see here

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Business India

A “Convenient” Truth..

I have been saying this for some time now that franchisee led expansion of the convenience store format seems to be the only way to get Modern retail closer to shoppers. 

I have talked about KBFP’s franchisee programme here. 

Seeing this article on my Linkedin timeline today made me feel strangely Nostradamus-like ! 

While KBFP had announced the launch of the franchisee programme nearly 9 months ago (Aug 2012 to be precise), there had been no indicator of any movement on this till now.

This article mentions that the group is looking at opening up a 1000 new stores in the next 2  years ! These stores will come up in Delhi, Bangalore and Mumbai. 

Going with the assumption that a kirana store caters to around 500 persons, and assuming a minimum of 1.5 crore population per city, the TT outlet universe would be around 40,000 stores. 

330 new ones on a base of 40,000 would barely register ! 

But if played smartly, I think this strategy could work.

The new stores could be launched by locality. Select the target localities (those with the right shopper profile)  and saturate the larger ones first. This would ensure a few things – 
1) Operational stability – it would be easier to serve more shops in selected locations rather then spreading oneself too thin.
2) Greater visibility and impact within selected locations.
3) Creation of pull – once the concept clicks with shoppers, the stores would start getting feedback. This could aid the decision to expand. As the trade starts to see merit in this, KBFP would get more requests and greater enrollment.

The rural experiment is another game changer in store – and FMCGs will be quick to see the value that this would add to them – significantly lower distribution costs, and reach to new consumers are the most obvious benefits! 

Let’s see where this round of crystal ball gazing ends up !

Categories
Business India

A Few Tricks of Trade…

The traditional trade outlet is a high volume, fast turnover location. Since the business operates on credit and wafer thin margins (the volumes make up for it !), there typically are many “short cuts” that a not so scrupulous shop owner can resort to, in order to get rich quick.

Common among these are
1) Underweighing
2) Adulteration
3) Over pricing
4) Mis calculation !
5) No pukka bills

Disclaimer : I have been at the receiving end of one of these lately – hence the personal angle to this post !

1) Underweighing – typically happens when one is out to purchase a loose commodity – typically sugar, rice or pulses. A simple adjustment of the weighing scale and voila ! The retailer makes a healthy premium on every such sale.

Consider the hypothetical example below – will remind you of a junior school maths problem.

A dealer buys sugar at Rs 37 per kg. He sells it for Rs 40 per kg. His weighing scale however measures out 990 g for each sale of 1 kg. What is the incremental profit made by this dealer on each such sale.

Current profit : Rs 3 per kg – 8% on CP
CP of 990 gm : Rs 36.63
Hence, incremental profit on each sale : 37 paise
Which translates to : 37 paise / 3 rupee – an astounding 12% higher than the original profit margin.
On a CP basis, his profit works out to 9.2% on 990 gm, versus 8.1% on 1000 gm – again a healthy difference of 1.1%  – considering that his average margin on FMCG products would not be more than 7-8%.

And do you really think you will ever notice this difference in weight ??

So how do you address this – simple – buy known brands. All manufacturers have to comply with a very stringent Weights and Measures act, which penalizes them in case of any discrepancy between declared product weight and actual.They also have consumer care and helpline forums where grievances can be aired and redressed.

2) Adulteration – Carried out with the same intention as the one above – except that it is harder to detect, and may have health consequences. Essentially, a cheaper substitute is added to the original article, to bring down the overall cost of the item. This game works very well till the costs of the replacement article are in check. The day these increase, another substitute is found.

3) Over pricing – this is where I got ripped off. I was shopping with my mother at Qutub Plaza (DLF Phase 1)  We walked into a store promising home delivery etc of foods. beverages, pulses etc.
We purchased three items there – all commodities. Mum also remarked that the rates seemed higher than usual, but the guy pointed us to the MRP sticker. There was no way we could argue beyond a point with that. However, we asked him to give us a bill for this purchase so that we could track prices.

On comparing these with similar weights in a nearby supermarket, we discovered that we had been over – charged by at least 35-40% on each article! Imagine the kind of money made on the side, which is not declared and not paid tax for. A sureshot way to go from nothing to everything in no time at all !

Moral of the story – Trust your instinct – Don’t pay the price printed on a sticker, because that could have been printed anywhere ! Only go by the price printed on the packaging – because there are fewer chances of that being tampered with.

This is where Modern Trade’s arrival will help consumers.
Standard product availability, at fixed prices, sold with printed receipts..combined with promotions to create consumer value ..arent’ these what consumers want ?

Categories
Business India

A Tale of Two Channels : Part 2 : Modern Retail

A smallish outlet universe of nearly 4500 outlets across the country, contributing nearly 5% by value to the Indian retail sector, Modern Trade (MT) is, well, in embryonic infancy right now. 
However, as mentioned in the earlier post, the lack of scale does not take away the operating complexities from the business. 

We saw that the traditional trade business strives to drive distribution of products across the outlet universe. Hence, its sustenance and growth depends upon whether stocks reach the outlets successfully, day in and day out. Initiatives to generate offtake are really very few, limited to tactical interventions like merchandising or hiring shop windows for display. This is primarily because the outlets are manned counters, unlike the self – service types found in Modern retail.

However, modern retail works on what is called the Distribution Centre (D.C) model of supply. The retailer’s supply chain measures stock on hand, outlet level sales by SKU, the minimum inventory level required, and then raises purchase orders. These orders are then billed by the manufacturer (the FMCG company) and supplied directly from the company warehouse to the retailer’s DC. Note that the distributor is usually not involved in this transaction.Once the stocks reach the DC, the system allocates them basis secondary sales and current stock position to each outlet. Hence, product distribution is taken care of. 

This, therefore, raises the next logical question – If distribution was the biggest agenda being driven by the traditional trade side of the business, it suddenly becomes redundant in modern retail – why then do you need a sales team to manage this, because all orders et cetera are system based ? 

That is because the role of a modern trade sales team is slightly different from that of a traditional trade team. 
The MT team too has to ensure product availability across stores, because, well, embryonic infancy also means less than perfect systems and lots of manual processes, hence room for errors. However, it is also the responsibility of the MT team to ensure that the available product is displayed and merchandised in a manner such that maximum off take happens, and the replenishment cycle does not fall off the rails. 

What this essentially means is that the MT guy has to not only ensure high quality merchandising of products and maintenance of fixtures, he also has to be aware of opportunities inside the store where he can purchase / poach space to increase stock availability, participate in store promos (especially around festivals) to piggy back on other product categories, use store level insights to develop tactics that would help drive off take. 

In addition, he also has to manage payments within the agreed time period, deliver stocks at high fill rates, within the specified freshness norms (typically products need have minimum 75% shelf life at the time of supply), at the right time (after taking appointments at the DC- because there are 50 other vehicles ready to offload). 

Basically, all the complexities of the traditional trade business, and much more !! 

To sum it up, both business work on the Availability — Offtake — Replenishment cycle.

Traditional trade focuses on ensuring availability and hence drives replenishment, while modern trade focuses on generating off take and hence replenishment.

Hence, the submission that the modern trade role involves tactical elements of marketing, which are needed to prompt consumers to give their product a try – would not be too far fetched in my opinion ! 

Categories
Business India

A Tale of Two Channels…

Good Morning. Here’s wishing you a very happy new year, hoping that you are blessed with good health, prosperity and success in your endeavors in 2013 !

Today’s post is about the two channels in India’s retail environment – Traditional / General Trade & obviously, Modern Trade. 

The reason for choosing this particular topic is well, a little personal and professional. Having worked in the FMCG sector managing the Modern trade business, I have seen little understanding, and even condescension, from peers and seniors, who normally would consider a Modern Trade posting as a “promotion” or a sinecure. 

Given the current scale of MT in India, its quite normal that a channel which contributes nearly 5% to overall industry turnover is less understood and lesser planned for.That it is a different eco system, with its own set of challenges and requirements, is another story !

But to understand why things are the way they are, we must take a look at how the traditional trade business works. 

Traditional trade is the industry term for the maze of small. unorganized retailers that span the length and breadth of the country.
Typical features of a “TT” outlet are – 
1) Small shop area
2) Low operating costs (no fancy fixtures, lighting, sales staff !) 
3) Easy consumer relationships, conveniently accessible, and offer value added services as well (home deliver, order on phone, credit) 

In short, your neighbourhood kirana store !

Nearly all FMCG companies utilize the services of a private individual known as a distributor to service this environment. The distributor essentially is a third party who takes care of the operational side of the business – selling the product to retailers, collecting cash, managing bad debts et cetera. He does this for a return on his investment, which is ideally supposed to higher than what a bank / stock market / financial instrument can give him. 

Do refer to Ketan Joshi’s book, What They Don’t Teach You About Marketing to understand the finer points about how and why this system works.

Note very well here that technically, the bulk of liabilities for the company end with the banking of the distributor’s cheque for stocks. 

A sub channel through which the distributors service the smaller / marginal retailers is the wholesale channel. Unlike retailng, which requires door to door outlet coverage, wholesaling is about fewer, larger volume transactions with faster rotation of money. 

Distribution therefore, becomes the most critical agenda that this entire system is supposed to deliver, the hypothesis being availability = offtake, or as is often said , “Jo dikhta hai, woh bikta hai”. 

Success or failure of this agenda is measured by third parties like AC Nielsen, which are appointed to audit selected stores and gauge whether measures of distribution are getting impacted or not.Eventually, increase in distribution is supposed to impact Market Share, which is what all companies are slugging it out for in the environment.

Distribution again has two imperatives – Higher Reach or greater depth. Companies would tend to shape their distribution strategy basis product type / category – for example – batteries / pens would follow a “greater reach” approach, whereas cold drinks would prefer to drive higher sales from a smaller, but high salience – outlet universe.

Hence, the key priorities for the traditional trade system can be summarized as – 

1) Ensuring greater coverage of the outlet universe
2) Making products available across most of them.
3) Management of channel partners to ensure ROI & hence stability (through increased turnover, lower operating costs etc)

Next week : A similar analysis of the Modern Trade business.

PS: Apologies to Charles Dickens for the post title ! 

Categories
Business India

Let There Be Light – Part 2

In my previous post, I had mentioned that industry leaders had finally started to share their views on the FDI in retail debate. This would help evaluate the issue from a fresh perspective and in the light of cold logic – used sparingly in the various discussions till now.

The latest addition to the list of sane voices is the excellent piece of analytical thinking by Messrs Rama Bijapurkar, S Raghunandan and R Sriram – writing for Forbes Magazine. 

While earlier opinions have been largely based on qualitative assessments and “gut feel”, this article is a sharp, quantitative study of the proclaimed benefits and imagined fall out of allowing FDI in Indian Retail.
The authors have examined the issue from six broad perspectives –
1) The impact of FDI – how and which consumers will benefit ?
2) Who will the likely players be
3) What is the estimated market size, and hence, the number of stores required
4) Where will these stores be made ?
5) What will happen to the small farmers ?
6) What kind of jobs would be created ?
The essence of this analysis is similar to what Mr Rajan B Mittal had said in his interview (see previous post).
(Luckily enough, I have had the good fortune to be on similar wavelength as these illustrious people 🙂 )

India’s retail model will evolve differently from the way it did in the US / UK. It will require different thinking, deep consumer understanding, lots of guts and deep pockets. It will not be the broad spectrum antibiotic, but it will definitely change this ages old occupation for good. 

I quite like the way the authors end their piece – to quote –  “So let’s reality-check the wild hopes and discount the alarmism, and get on with the job of building one more good thing for the future. It will not be the cure for all ills, but it certainly is one more remedy that needs to be given its best shot.”


Meanwhile, Gaurav Chaudhury and Dipankar Bhattacharya, writing in The Hindustan Times mention that Delhi might be one of the first states to allow FDI. CM Shiela Dixit has already started the process of dismantling the APMC Act, and is likely to fast track the process. They also examine the issue from various lenses, and quote a few examples of the impact of modern retail. They contend that direct sourcing will not improve the lot of the farmer by a large extent, since the number of farmers benefiting from this would not be large – this strangely echoes the earlier article as well. They conclude by saying that there are enough supporters on both sides of the argument.


So, what does this leave us with ? More clarity than confusion, I certainly hope. To reiterate what I had said here, this intervention needs strong policy making by the government, so that it can deliver the intended benefits that it claims. It will have good and not so good results, but it is upto us how to maximize the former.