Devika Singh, Moneycontrol 

29 June 2021 

Post-COVID, the sanitiser market will shrink considerably and there will be room only for old trusted brands or bulk low margin suppliers, suggest experts.

Every one in two urban households are now using sanitisers, as per data from Kantar.

The pandemic has triggered a gold rush in the health and hygiene sector, particularly sanitisers – even if temporarily.

A severely underpenetrated category in the pre-pandemic period, sanitisers have witnessed massive adoption amongst the consumers since March 2020.

According to data from Kantar, annually, before the pandemic struck (March 2019 – February 2020) hand sanitiser penetration was about 1.2 percent; on an average in a month only 0.1 percent of the urban households bought the product.

However, during the first 12 months of the pandemic, the category reached nearly 50 percent penetration, a quantum leap.

It means everyone in two urban households are now using sanitisers, as per data from Kantar, the world’s leading data, insights, and consulting company.

Overall, the hygiene category had witnessed a huge spike in sales as the first wave of the COVID-19 pandemic struck the country in March last year.

Although the sales declined as the cases subsided, the demand jumped up again with the second wave of the pandemic.

Several companies had made a beeline for the category and joined the sanitiser gold rush.

According to data from Kantar, as many as 350 brands of sanitisers were launched in the first three months of the pandemic.

Consumers are also buying more products in the hygiene category such as vegetable cleaners and surface disinfectants.

Data from Kantar shows that vegetable and fruit cleaners now have a penetration of 2 percent and surface disinfectants 1.5 percent.

“For a category that is driven by a limited number of brands and has not even been there for a year, it is a huge success,” said K Ramakrishnan, MD – South Asia, Worldpanel Division, Kantar.

Though the category overall has seen an increase in demand, industry and experts expect only a few big brands with a strong legacy in the hygiene segment to sustain in the long run.

Hence companies such as Marico have already started deprioritising the category.

“Of late, we have realised that it (sanitisers) is more of a tactical opportunity for us to provide consumers what they needed then,” Pawan Agrawal, CFO, Marico, said.

“These products do not fit into our scheme of things as we understood that consumers will go back to the legacy brands with strong equity in hygiene, and hence three-four brands will have a larger play in the segment,” he added.

Marico, hence, has decided to not make any fresh investments in the category going ahead.

Raymond Consumer Care, which sells sanitisers under its brand Park Avenue, too, has similar plans.

“We believe post-COVID, the sanitiser market will shrink considerably and there will be room only for old trusted brands or bulk low margin suppliers. Given this context, we will maintain strategic presence in the chemist channel, but this segment will not be a priority,” admitted Sudhir Langer, CEO – Raymond Consumer Care.

Other companies such as CavinKare plan to focus on flagship products such as handwashes.

Said Raja Varatharaju, GM Marketing – Personal Care, CavinKare: “As the demand for sanitisers continues to slow down, our core focus will remain on offering a bouquet of products under the health and hygiene portfolio as we move forward. We will increase and strengthen our focus on hand wash, as it is a flagship product in our portfolio.”

Reckitt’s Dettol, ITCs’ Savlon and Hindustan Unilever Limited’s (HUL) Lifebuoy are some of the top brands in the health and hygiene space, which are likely to benefit from this trend in the long run, indicate experts.

Consumers associate certain products and categories with certain brands and are inclined to buy from them, said Devangshu Dutta, Chief Executive at retail consultancy, Third Eyesight.

Hence, companies, which saw in the pandemic the chance to tap the short-term opportunity, do not want to focus on it any longer.

Source: moneycontrol

Written By MONEYCONTROL NEWS

The biggest winner in terms of sales was BigBasket, which accounted for 50 percent of the sales growth followed by DMart, Grofers, Spencer’s Retail and StarQuick (Tata)

Representative Image (Reuters)

Online grocery sales for the largest online and offline retailers grew by a combined 65 percent to Rs 6,820 crore in FY20, while collective losses measured Rs 1,175 crore.

The biggest winner in terms of sales was BigBasket, which accounted for 50 percent of the sales growth, followed by DMart, Grofers, Spencer’s Retail and StarQuick (Tata), a report by The Economic Times said.

Moneycontrol could not independently verify the report.

BigBasket owner Innovative Retail Concepts clocked a net sales growth of 43 percent, or Rs 3,418 crore, while losses rose to Rs 424 crore, as per data with the Registrar of Companies and business intelligence platform Tofler, the report said.

Most executives and experts credit the growth jump to the COVID-19 pandemic and lockdowns, which pushed consumers towards online options for grocery and other purchases, it added.

Follow our LIVE Updates on the coronavirus pandemic here

A spokesperson for Grofers told the newspaper that the value of goods the company sold in FY20 vaulted 88 percent to Rs 3,000 crore, with losses at Rs 637 crore, largely due to investments for strengthening delivery services and building awareness.

Among offline retail chains, DMart’s e-commerce business saw sales zoom to Rs 345 crore, with losses at Rs 79 crore. StarQuick operator Fiora Online saw revenue of Rs 33 crore against a loss of Rs 21 crore and Spencer’s owner Omnipresent Retail reported Rs 15 crore sales with a loss at Rs 14 crore.

Devangshu Dutta, CEO of consulting firm Third Eyesight, said that the customer shift to online propelled investments to enhance capabilities in the space, while a concurrent rise in the average order values would likely benefit companies with a “healthier bottom line”.

Nielsen noted that online sales in the FMCG segment were notable, accounting for 3.1 percent of the India market value–in metros this surged to 8.6 percent as of the September quarter.

Source: moneycontrol

Indian retailers welcoming customers back as stores are opening up – a look at what changes are in store.

Written By Rasul Bailay

NEW DELHI: Jeff Bezos, the founder of Amazon, will visit India in January when he is likely to meet Prime Minister Narendra Modi. During his visit he will kick off the US retailer’s annual event around small and medium enterprises, which are perceived to be hurt by deep-pocketed ecommerce companies.

The world’s largest online retailer is said to be worried about the changing ecommerce rules in India, where the Seattle-based company has invested more than $5 billion and created one of its largest foreign subsidiaries.

Bezos comes calling amid protests by a group of small traders against foreign-funded ecommerce companies. The Amazon founder is expected to highlight that it is generating jobs in India and empowering SMEs and other small businesses, according to two people familiar with the matter. He will also raise aspects such as stable business environment and policy continuity for foreign companies, they said.

“We do not have any plans to share at present for this,” an Amazon spokesperson said in an emailed response to a questionnaire regarding Bezos’ upcoming visit.

The outcry against ecommerce companies escalated after the Diwali festive season, when small traders accused Flipkart and Amazon of “unfair business practices” and violation of foreign direct investment rules. They blamed the predatory pricing strategies of the two foreign-owned marketplaces for a slump in traditional retail business during Diwali.

Flipkart and Amazon generated combined sales of Rs. 31,000 crore ($4.3 billion) during the 15-day festival period in October, according to a report by Red Seer Consulting.

The government has been stepping up its scrutiny of Amazon and its India rival Flipkart over their compliance with India’s foreign direct investment laws for ecommerce marketplaces.

The commerce ministry had asked Amazon and Flipkart to furnish details including their shareholding, subsidiaries, business structure and information on their top sellers and their tax details.

Amazon and Flipkart have responded to the questions raised by the government and maintain that they are in full compliance with FDI legislation.

“It is a huge distraction for us,” a senior ecommerce executive said, asking not to be identified. Amazon has reasons to be nervous. The US giant considers India its fastest-growing market with a potential to reach $10 billion in gross merchandise value and outpace the UK, Germany and Japan as its largest overseas subsidiary. In October, Amazon pumped in Rs. 2,800 crore into the flagship Amazon, in marketplace after injecting Rs. 9,450 crore in the unit last year.

So far, Amazon has invested more than $5 billion in India. “The various twists and turns in policies and caveats over the years have created ambiguity and room for interpretation as to what is allowed under the ambit of foreign investment,” said Devangshu Dutta, CEO of retail consultancy Third Eyesight.

“If any foreign-owned or foreigninvested entity is operating in the fuzzy zones of policy and law, there is bound to be concern. ‘Interpretation’ is a double-edged sword — on the plus-side it can give businesses strategy flexibility, but the downside is that government officials can also interpret it strictly.”

In October, Walmart CEO Doug McMillon had written to Modi, seeking certainty and a predictable business environment in India.

Last year, Walmart had purchased Flipkart, India’s largest ecommerce entity, for $16 billion, bringing the US adversaries to a direct fight over market share in the nation’s burgeoning online retailing market.

Following Walmart’s acquisition of Flipkart, India amended the FDI rules for online marketplaces in December, plugging many holes that Amazon and Flipkart are alleged to have misused. Opponents of foreign-funded ecommerce accuse both the global titans of virtually running inventory-led ecommerce, which India bars.

The legislation called Press Note 2 restricted bulk purchases by any vendor from any entity or group company of marketplace to 25%. The rules banned any financial affiliate of the marketplace operator from selling on such platforms. These changes came as blows to Amazon and Flipkart as they either sold through partner entities or through independent vendors that sourced directly from wholesale units related to the FDI-funded

Source: economictimes

Business Standard, Mumbai, February 28, 2011

Sayantani Kar (with inputs from Preeti Khicha)

When some of India’s big retail chains banded together recently to substitute Reckitt Benckiser’s products with private labels to protest the latter’s decision to cut sales margins on its products, they were doing something many global retailers have done with great success. Part of their overall strategy, especially for large chains in the US and Europe, is to develop quality private label products that complement other pieces in their marketing mix. While this is one way retailers can differentiate their firms from competition, it also helps them flex their muscles in their relationships with brand manufacturers. Indeed, retail giants Tesco, Walmart and Carrefour have a significant portion of their sales coming from private labels — ranging from 10 per cent for Costco and 50 per cent for Tesco.

India is a back runner in the private label race, but it is catching up. A Shoppers Trend Study by Nielsen found awareness about private labels has gone up from 64 per cent in 2009 to 78 per cent in 2010 across 11 cities in India. Nielsen Director (retail services) Siddharthan Sundaram says, “Over the last three to four months, we found an increased awareness of private labels in categories such as staples, household products, personal care products such as soaps, biscuits and packaged groceries.” Thanks partly to the recent economic downturn, there is greater acceptance — and even loyalty — to such brands in India, say marketers. Future Group Business Head (private brands) Devendra Chawla reasons, “A label on the shelf becomes a brand by covering the two feet distance from the shelf to the trolley. After all it is the consumer’s choice.” Even in the toughest segment for private labels to crack — fast moving consumer goods including food and personal care — store labels claim share of 19-25 per cent.

Low-involvement categories such as household cleaners were among the first to see the entry of private labels (17-44 per cent of sale in modern trade), bringing in huge margin-lifts for modern retailers. In categories such as food products — jams, biscuits and staples — private labels today contribute more than 25 per cent of modern trade sales. Little wonder, retailers are now mining shopper data to make private labels shed their ‘low’ly tag — low involvement and low cost. Store chains are segmenting their brands according to consumer needs, combining more than one brand according to consumer behaviour, besides launching high-involvement premium products and innovative packaging to give national brands a run for their money.

Innovate or die
Retail innovation has had a big role to play in speeding up the process of consumer acceptance. Future Group’s retail arm, which includes Big Bazaar and Food Bazaar, calls its in-house products ‘private brands’ not labels. It has a separate team, headed by Devendra Chawla, to research and test FMCG products before launch. The team has a range of private brands — Tasty Treat, Fresh and Pure, Cleanmate, Caremate, Sach, John Miller, Premium Harvest and Ektaa. Look at how it is using shopper data to improve its products. The insight that kids found ketchup bottles cumbersome and had to be served — making it inconvenient if an adult was not around — led it to change the packaging that in turn gave the brand a margin advantage. By offering ketchup in pouches, it saved on the price of the glass bottle and freight (pouches take up less space in a truck, hence more can be fitted in). While ketchup in glass bottles continue to be Rs 99 for a kilo, its Tasty Treat ketchup pouches come in Rs 59 packs.

By working with vendors it has also come up with interesting combinations — for example, its Tasty Treat jam has three small tubs packed as one unit, each tub containing a different flavour to offer consumers larger variety.

Retailers have now donned the hats of “product selectors” and “product developers” at the same time, points out Third Eyesight CEO Devangshu Dutta. “So far, most of the retailers were just selecting products from vendors which are mostly lower-priced knock-offs of manufacturer brands,” he says. Not any more.

Ashutosh Chakradeo, head (buying, merchandising and supply chain), HyperCity Retail, explains the process his company follows: “To develop food products, we identify vendors, tie up with food laboratories, chefs and consumers to be part of the tasting panels. Before launching a private label we do at least a month of consumer testing. We identify customers from our loyalty programme called Discovery Club, which tells us who buys a certain category of product. We give the relevant consumers our private label products for trial for a month. We meet the customers at their homes, take their feedback and these changes are incorporated into the private label brand.”

“Our stores act as research labs and are a constant source of feedback,” points out Chawla of Future Group. Chawla estimates 3-4 per cent of the sales of private labels are ploughed back into packaging and design innovation. Reliance Retail CEO Bijou Kurien says, “The teams are our main investment in private labels. Our 100-strong designers across all the formats help in coming up with product designs that fill a need gap or offer a few more features at the same price as national brands.” Reliance Retail has recently launched its own brand of watches priced Rs 149-199 which “no national player can offer” points out Kurien.

The edge
Most vendors directly supply to retailers’ distribution centres, cutting out cost leakage at the distributor’s and carrying and forwarding centres. Direct access to store shelves and aisles also cuts out the high mainstream advertising costs that brands have to bear. By clever product arrangements and in-store promotions, retailers can sway the shopper and draw attention to the price advantage. Chakradeo says, “We display private labels in heavy footfall areas in the store. We complement displays — so we keep our private label ketchup near the bakery.”

To tackle the tricky personal care category of face creams and shampoos that Aditya Birla Retail’s More chain has entered, it plans to communicate promotional offers straight to its loyalty programme members. “It will help us induce trials,” says Thomas Varghese, More’s CEO.

Bundling products is another way to woo the value-conscious consumer. Six months back, Future Group started bundling its private brands. Chawla says, “Take home-cleaning, which requires a floor cleaner, glass cleaner, toilet cleaner and utensil cleaner which we combined as a shudhikaran solution of our Cleanmate brand.” The combi-pack costs Rs 125, which would come to around Rs 220-250 if shoppers bought a la carte. The margins are still high at 26 per cent. “Vendors are assured of volumes,” points out Chawla.

What it also does is convert the fence-sitter who has not yet bought into a category. For example, consumers who avail of the shudhikaran solution also get into the habit of using glass cleaners — a category which has a small base and gets most of its sales from modern trade. Similarly, Future Group saw a 25 per cent spurt in the sales of soups when it clubbed soup mugs with its Tasty Treat soup packets based on the insight that Indians preference to sip their soup out of a coffee mug.

Don’t be surprised if you see MNC brands coming out with combo-offers for their products, way bigger than the occasional bucket with a detergent!

Growing up
There are signs the industry is evolving. Private labels in FMCG are shedding their low-cost tags. But retailers know better than to vacate low price-points altogether. Instead, they are segmenting their brands just as a manufacturer brand would do. Chakradeo of Hypercity says, “Over a period, we hope to increase the stickiness and the differentiation our brands bring to our stores. Particularly, in staples where we have seen our private label business grow rapidly. This is a very quality and price-sensitive category. We started with basic products but now we have premium daals (lentils) and basmati rice as part of our portfolio.”

Future Group too has its ‘good, better, best’ policy firmly in place. In staples, the stores offer some products ‘loose’, such as rice, wheat, lentils, which is at the bottom of the ladder. Its Food Bazaar version of the products straddle the middle category, and above the two is its brand, Premium Harvest, which retails at a price higher than some manufacturer brands.

Stickiness may also result from the manner in which retailers are positioning their brands. Future Group’s brand Ektaa will retail regional food and staples across its stores in the country so that migrants can buy supplies they are comfortable with. Be it Govindbhog rice and kasundi (a rice variety and mustard sauce preferred by Bengalis), khakra (Gujarati snack) or murukku (loved by Tamilians). Boston Consulting Group Partner & Director Abheek Singhi says, “Indian retailers are not cut-pasting private label products from other markets but adapting them.”

Are private labels a risk worth taking? Chakradeo says, “The entire product formulation for our cleaners was done in partnership with Dow Chemicals, USA. We did not make any investment and we gave them a percentage of sales as fee. Investments are not huge in making private labels as in most cases it is partnered with vendors. It is more of operating expenses than capital expenditure.”

Future Group brought down logistics costs further by 6-8 per cent by appointing vendors in more than one region for 10 of its product categories to fill its distribution centres. Chakradeo adds, “As the volumes go up, we will be able to put up for backend infrastructure facilities for development and R&D.”

Should national brands be worried? Devangshu Dutta says, “As long as retailers have access to the production and development and have customers for it, the private labels will remain profitable.” India Equity Partners Operating Partner V Sitaram sums up, “In modern trade, though the market leaders will face some slip in market share, the number 3 or 4 brands might have a bigger problem in certain categories thanks to private labels.”

As retailers leverage consumer insights to deploy private labels more effectively, national brands are aggressively fighting the challenge. From sprucing up supply chains to galvanising in-store promotions, they are covering all bases. KPMG Executive Director Ramesh Srinivas says, “Earlier brands had to adjust between a modern trade and a general trade supply chain. The former had to be serviced directly at the stores or had their own supply chain while the latter used the manufacturer’s supply chain. Now, some brands separate modern trade teams and even distributors.”

Britannia Category Director (delight and lifestyle) Shalini Degan says, “We have divided our portfolio into three categories, A,B,C, each having its benchmark fill-rate. We don’t allow fill-rates to drop below those levels. Why the segmentation? We need to focus on brands which have a higher traction in modern trade when servicing it, else we might end up focusing on brands that are not modern trade-led.”

Fill-rates denote how often and to what accuracy the retailer’s orders for a product are supplied by the manufacturer. Low fill-rates could mean lost opportunity since the shopper sees an empty shelf or a private label instead of the brand she might have thought of picking up.

Samsung Vice-President and Business Head (home appliances) Mahesh Krishnan says, “We have gone in for central billing system 4-5 months back with all large-format retailers. Orders are tracked on a daily basis giving retailers more control over the chain.”

In other words, private labels are here to stay and will evolve as more and more chains gain national footprint and the economies of scale kick in. Dutta of Third Eyesight says, “Gross margins for organised retailers are still low compared to global standards: So, margin fights will continue for some time till retailers gain a bigger share of the pie.”

(Also read: The Private Label Maturity Model.)