ng Other People’s Business
Shopping for the humble bathing soap has now become an arduous task for the tiny tot’s mother. She now has to choose not just among proven national brands like Johnson & Johnson or Himalaya, or for that matter Wipro’s Baby Soft; time permitting, she has to examine the benefits of picking a Doy Kids versus a Woodwards or a Mysore Sandal baby soap, and carefully evaluate the pros and cons of deploying shapes such as elephant, lion and bear and many others that grace the shelves of modern retail. FMCG and food sections in such stores have seen an influx of smaller and regional brands in recent months. But the rules of distribution for modern chain-stores are very different from distribution for kirana stores. While the tussle between large brands and retailers make news headlines, smaller brands have more often grappled with margin issues, delayed payments and supply chain shortfalls. Enter FSC Brand Distribution Services (BDS), a subsidiary of Future Supply Chain Solutions (FSCS), the logistics arm of the Future Group. A Big Bazaar or Food Bazaar may or may not stock the above brands but an outfit such as this helps brands of any size access a full-fledged modern trade servicing team, complete with logistics, store management as well as strategy. More than the large pan-India brands, it is the regional brand which stands to gain by riding on modern trade. Devangshu Dutta, chief executive, Third Eyesight, a retail consulting firm, says, “Small or new brands offer the modern retailer more margins while the retailer, in turn, affords them consistent demand and a scale to grow. Future Group has done it more aggressively than others.” First Steps Into Modern Retail Most of the brands that have signed up with BDS first came into modern retail, and often wide national circulation, through Big Bazaars and Food Bazaars which stock non-food FMCG products as well. Modern trade may still comprise 5-6 per cent of the overall FMCG market of Rs. 130,000-Rs. 140,000 crore, but in urban areas it hovers at 20 per cent. Devendra Chawla who is the President of Food and FMCG at Future Group, has studied brand-play closely at its retail stores. He says, “The many categories of Indian packaged food are still restricted to their original markets in their regions. Some of the regional brands are also challenger brands which lack the wherewithal of large brands in distribution. Modern retail stores can incubate these over time, building customer loyalty. For such brands they also provide the quickest route to the national market.” As many mid-sized and small brands (below Rs. 500 crore) lack the volumes to justify a separate team or investment in a supply chain to keep in stride with organised retail, they take the next best option - to enter some sort of distribution understanding with the big daddies of the game - such as the Future Group, Hypercity, Reliance and more. At the same time, organised retailers, which are often large national players, don’t bend terms to suit such brands. Future Supply Chain CEO Anshuman Singh explains, “Organised retail chains expect brands to manage shelves, offer promotions and take replenishment orders through automated systems.” In general trade, the brands would just sell stocks to a distributor/stockist who would take care of the supply chain from there on. He would sell it to dealers and retailers who place orders ad hoc, on the phone. The larger players in the FMCG space service organised retailers themselves while others resort to logistics companies and transporters or even general trade distributors who supply to stores on their routes. But these players are not comfortable with the different set of rules. For example, when servicing modern trade, distributors who have to buy stocks from brands and then pass it on to modern retail stores, might have to wait for payment since organised retailers have longer credit periods than the stockists in general trade. They often pay those...
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