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August 11, 2026
Samar Srivastava, Forbes India
11 Aug 2026
Ask someone what an exurb is and chances are you’ll be met with a blank stare. Few city slickers would have heard of the term, let alone visited one. Located about 90 minutes from Gurugram, Ateli fits the description perfectly.
The drive is deceptively easy. Wide highways, sparse traffic, and long stretches of open countryside gradually give way to a settlement that feels oddly familiar. “If you’d had shut my eyes and brought me here, I’d have said we weren’t too far from Gurugram,” says Manish Tiwary, 56, managing director of Nestlé India.
Ateli is a residential settlement that has grown around its agricultural market. Cars jostle with cattle for road space. Kirana stores spill onto narrow streets.
Labourers gather at intersections in search of daily wage work while small factories, unfinished commercial buildings, and modest homes stand shoulder to shoulder. It has the look and feel of the outskirts of any fast-expanding Indian city.
Yet beneath that ordinariness lies something far more significant. With a population of barely 9,000, Ateli represents the kind of semi-urban India that is rapidly emerging as the country’s next consumption frontier. Rising incomes, better roads, deeper internet penetration, and easier access to branded products are narrowing the divide between metropolitan India and its smaller towns.
For Nestlé India, places like Ateli have become central to its next phase of growth. Tiwary, who took Forbes India through the town on a cloudy May morning, is convinced that India’s consumption story is changing. “The aspirations are the same,” he points out. “What sells on the fringes of an urban market is similar to what sells here.”
Whether consumers live in Gurugram or Ateli, they increasingly want the same products, brands, and experiences. The challenge for companies is no longer generating demand; it is ensuring that products are available where consumers want them, and at prices they are willing to pay.
Remapping the route
The conviction is informed by experience. Before taking over at Nestlé India, Tiwary headed Amazon India, where he watched demand for smartphones, air conditioners, diapers, and other discretionary products steadily spread beyond India’s largest cities. Consumer aspirations, he realised, were travelling much faster than traditional distribution networks.
Getting Maggi noodles, Nescafé coffee or KitKat chocolates into thousands of towns like Ateli, however, is a far more complicated proposition than shipping electronics through an ecommerce warehouse. On a per item percentage basis, the cost of distribution is higher, there are also more varied stock keeping units (SKUs) and the frequency of consumption means replenishment has to be faster. Fast-moving consumer goods (FMCGs) are low-ticket, high-frequency purchases. Margins are thinner, replenishment cycles are shorter and distribution economics are far more demanding.
Nestlé’s answer has been a patient, years-long investment in rebuilding its route to market. “Earlier, the company was over-indexed on urban India but the focus has now shifted to rural India,” says Amit Agarwal, SVP, fundamental research, Kotak Securities.
The timing appears to be fortuitous. Nestlé kicked off the June quarter with another strong performance, reporting a 48 percent jump in net profit to ₹975 crore, on a 25 percent increase in revenue to ₹6,378 crore. With this the company continued the strong performance it posted in the year ended March 2026. March quarter revenue and profits were up 23.1 and 22 percent respectively. The management attributed the performance to strong volume growth, wider distribution, and continued traction across both urban and rural markets, while cautioning that inflation in commodities such as cocoa, edible oils, and sugar remains a key watchpoint.
Investors have taken notice. Nestlé India’s shares have risen around 16 percent over the past year, giving the company a market capitalisation of roughly ₹2.79 lakh crore. At about 80 times forward earnings, it commands the richest valuations in India’s consumer sector, trading ahead of multinational peers such as Hindustan Unilever (HUL) and Colgate-Palmolive as well as domestic rivals Dabur, Marico and Godrej Consumer Products.
The premium reflects more than strong quarterly earnings. Across corporate India, companies that invested early in brands, distribution and execution are beginning to pull ahead as consumption gradually recovers. Listed liquor companies such as United Spirits and Radico Khaitan have continued to post double-digit revenue growth, reflecting resilient discretionary spending. Automobile manufacturers have benefited from lower financing costs and tax relief, particularly in entry-level motorcycles and small cars. FMCG companies with a meaningful rural presence have also reported improving volume growth.
The recovery has been uneven, but the direction is becoming clearer. According to NielsenIQ, rural India has outpaced urban markets in FMCG growth for eight consecutive quarters, with improving household incomes and higher spending in smaller towns driving much of the momentum. For companies that have spent years investing in distribution rather than chasing short-term margins, the payoff is beginning to manifest.
Nestlé believes it is particularly well positioned. Its categories—coffee, chocolates, baby food and noodles—remain under-penetrated compared with staples such as biscuits, soaps and toothpaste. That gives the company a rare opportunity: Not merely to take market share from rivals, but also to create new consumers. That ambition begins in places such as Ateli.
Direct Push
Ground zero for Nestlé’s rural strategy is Rakesh Kumar’s 12-by-12-foot kirana store-cum-warehouse in Ateli. The 35-year-old, who comes from a farming family, has been running the shop for more than a decade. The biggest change, he says, is not the number of customers walking through the door, but what they are buying. Alongside soap bars now sit oats, muesli, coffee, soups and Cerelac baby food.
“These are products no one was interested in five years ago,” Kumar says. “Now we get steady enquiries because people have become far more health conscious.” The shop’s shelves tell the story of India’s changing consumption patterns. Kumar stocks products from dozens of companies—from ITC and Perfetti to Ferrero and Keya—but his store also offers a glimpse into how the country’s FMCG distribution model is being rewritten.
A decade ago, retailers like him were supplied largely through wholesalers. Consumer companies concentrated their own sales forces in larger towns where inventory turned faster, leaving intermediaries to service smaller towns and villages.
It was an efficient system: Mass television advertising created demand, wholesalers ensured products reached retailers in a cost-efficient manner, and shops became the last mile of India’s consumption engine.
That model is now under pressure. Modern trade, ecommerce and quick commerce have chipped away at distribution as a competitive moat. Digital advertising has fragmented audiences, while nimble direct-to-consumer (D2C) brands have intensified competition across categories.
Simply reaching consumers is no longer enough. Companies increasingly need to know what consumers are buying, how quickly tastes are changing and which products are beginning to gaining traction.
Nestlé’s response has been to rethink rural expansion itself.
A re-run
“It has become more holistic and comprehensive,” says Sushrut Nallulwar, sales director at Nestlé India. Distribution remains the backbone of the strategy, but it is now supported by technology, locally relevant marketing and products designed specifically for different consumer segments. “It’s not just about scaling up route-to-market infrastructure anymore.”
Tiwary has watched this move before. During his years at HUL, the company dramatically trebled its rural direct footprint after identifying villages and small towns as the next engine of growth. The then chairman Harish Manwani famously told shareholders that though competitors were creating gaps, HUL had to “continuously create new gaps”.
Nestlé is now following a similar philosophy, albeit for a very different retail landscape. Retailers such as Kumar, who once depended almost entirely on wholesalers, are increasingly serviced directly by the company.
The economics are demanding. Serving thousands of retailers, each buying between ₹1 lakh and ₹5 lakh worth of products every month, requires warehouses, technology, logistics, credit management and a large field sales force. “The number of outlets is less important than what direct distribution gives you,” says Nallulwar. “It gives you control.”
Today, Nestlé reaches roughly 6 million retail outlets across India, of which around 2 million are serviced directly. Those outlets account for nearly 75 percent of the company’s sales, giving it far greater visibility of consumer behaviour than a traditional wholesale-led model.
While distribution models vary across FMCG companies, wholesalers continue to account for a much larger share of sales for most players. Nestlé estimates that wholesale contributes about 20 percent of its business compared to an industry average of 40 to 45 percent. The company is effectively choosing to incur higher distribution costs in return for better market intelligence and tighter execution.
Buying better data
Every direct interaction with a retailer generates information. Nestlé learns which products are moving fastest, which pack sizes consumers prefer, how frequently shelves are replenished and where competitors are beginning to gain ground. If a rival noodle brand suddenly starts selling well in Ateli—or consumers begin shifting towards smaller packs—the company knows almost immediately.
“Nestlé is essentially buying better data,” says Devangshu Dutta, chief executive of Third Eyesight, a retail consultancy. “That may depress margins in the short term, but it creates a much stronger competitive position over time. Better visibility of what retailers are stocking and consumers are buying allows it to react much faster than a wholesale-led model.”
Control, however, extends well beyond making sure cartons arrive on time. The backbone of that system is increasingly digital. Orders are placed through Nestlé’s retailer app. Field sales representatives capture information on stock availability, competing brands and consumer preferences during every store visit. That information flows back into the company’s planning systems, allowing it to fine-tune inventory, merchandising and product innovation market by market.
For Nestlé, distribution is no longer about moving products. It is about reducing the distance between the consumer and the company’s decision-makers. The insights frequently translate into product decisions. According to Nallulwar, nearly two-thirds of rural FMCG purchases happen at the ₹5 and ₹10 price points, making affordability just as important as physical reach. “It is not just about reaching outlets,” he says. “There has to be consumer relevance in terms of availability at the right price points.”
One example hangs right outside Kumar’s shop.
Seeding the market
Insights from Nestlé’s sales teams prompted the company to redesign its ₹10 Maggi packs. Instead of individual packets, they are now linked together in long strips that retailers hang outside stores.
The redesign wasn’t simply about affordability. In rural India, where shelf space is scarce and many purchases are made on impulse, the hanging strips function as miniature billboards. Nallulwar calls it “aerial visibility”, ensuring the product catches a shopper’s eye before they even step inside the shop.
For Kumar, the benefits are equally tangible. Orders placed through Nestlé’s app typically arrive the following day, giving him faster replenishment and, at times, better credit terms than buying from wholesalers.
On India’s next consumption battleground, speed of information may prove just as valuable as speed of delivery.
Walk around Ateli and those investments are hard to miss. Across from Kumar’s store, retailers have been provided with visi-coolers stocked with ready-to-drink Nescafé, KitKat and other chocolates. “We are still seeding the market,” says Tiwary. “But it is important to be present. Expanding the category is important.”
The opportunity goes beyond instant noodles. Coffee, chocolates and baby food are all beginning to gain traction in smaller towns, but their penetration remains far below that of more established FMCG categories.
Maggi noodles, for instance, has a rural penetration rate of just 10 percent, measured by consumers who have eaten the product during the previous month. The frequency of Maggi consumption is far below the 80 percent for biscuits or 90 percent penetration for toothpastes. When you compare the categories, the size of the opportunity is evident.
“The biggest opportunity for us is that household penetration in our categories is still significantly lower than in developed categories,” says Nallulwar. “There is a large headroom for these categories to grow.”
White Spaces
For most consumer companies, growth comes from taking market share away from competitors. Nestlé believes India’s biggest opportunity lies elsewhere. It is betting that the country’s next consumption boom will come not from persuading consumers to switch brands but from encouraging them to buy products they have never bought before.
This partly explains why the company has spent the past three years expanding its distribution network into towns like Ateli. Getting products onto shelves is only the first step. The real prize is changing what ends up in the shopping basket.
Coffee illustrates the opportunity. For decades, India has remained overwhelmingly a nation of tea drinkers. At just 70 grams per person annually, India’s coffee consumption is a fraction of the global average of 1.3 kg, according to the Coffee Board of India. Europeans consume about 4.5 kg a year, North Americans 5.1 kg, while Finns drink more than 12 kg per person annually.
The gap within India is equally revealing. According to Crisil, urban Indians consume roughly four times as much coffee as their rural counterparts, suggesting that rising incomes and urbanisation could significantly expand the addressable market.
For Nestlé, the opportunity is, therefore, not merely to persuade consumers to switch from one coffee brand to another; it is to persuade millions of Indians to drink coffee in the first place. “Coffee is still a significantly under-penetrated category,” says Sunayan Mitra, director, Coffee and Beverages, Nestlé India. “That gives us a long runway for growth.”
The strategy begins with affordability. Consumers are introduced to the category through ₹2 Nescafé sachets sold at neighbourhood kirana stores and tea stalls. As incomes rise, Nestlé hopes consumers will graduate to jars, ready-to-drink cold coffee, and eventually premium offerings such as Nescafé Gold Blend and Nespresso.
That journey—from an impulse purchase to a premium brand—is shaping how the company thinks of growth. “Ultimately, if I don’t have anything new to offer the consumer, why would they upgrade?” says Tiwary.
The same philosophy applies to other products as well. Take chocolates. Per capita chocolate consumption in India remains among the lowest globally, despite rapid premiumisation over the past decade. Baby food continues to be significantly under-penetrated. Pet food, while growing rapidly, remains a tiny category compared with the developed markets. Even Maggi noodles, as mentioned earlier, reaches only around 10 percent of rural consumers despite being Nestlé’s biggest brand.
Finding these categories has become a business in itself. Nestlé Professional, the company’s out-of-home business, has evolved into a testing ground for identifying such opportunities. Instead of waiting for consumer demand to emerge, the division increasingly searches for fragmented local markets that can be organised around trusted brands.
Two years ago, for instance, the team identified an opportunity in Kerala’s coastal belt, where coconut milk powder is used by restaurants and institutional kitchens. The market was dominated by regional manufacturers with varying quality standards.
Leveraging the familiarity of the Maggi brand and working closely with chefs and caterers, Nestlé began to push its own coconut milk powder. “It was a roaring success—we hit the jackpot,” says Saurabh Makhija, director, Nestle Professional, declining to disclose sales numbers.
The Kerala experiment has since become a template. In Hyderabad, where Irani chai is woven into the city’s food culture, Nestlé segmented bakeries into premium, mainstream and economy outlets before introducing Milkmaid as an alternative to locally produced sweetened milk. Rather than attempting to change consumer habits, the company sought to formalise a fragmented market.
The lesson, says Tiwary, is that India can no longer be viewed as a single consumer market: “It is many different Indias.” A category that barely exists in one state may be mature in another. A product that succeeds in Bengaluru may fail in rural Bihar. The challenge is no longer creating national brands but identifying the thousands of local opportunities. That is where Nestlé believes its investment in distribution begins to pay off.
Every retailer visit, every digital order and every conversation between a salesman and a shopkeeper adds another piece to the puzzle. The next ₹10 product, the next regional launch or even the next national brand may not emerge from a Mumbai boardroom. It may emerge from a kirana store in Ateli.
The Next HUL?
Nestlé’s distribution push, its search for white spaces and its willingness to create entirely new categories have not gone unnoticed by investors. At nearly 80 times forward earnings, Nestlé India trades at a substantial premium to its rivals. The valuation implies investors are looking well beyond the next quarter.
For decades, HUL has been the benchmark for Indian FMCG companies—a business built on unmatched distribution, category breadth and extraordinary execution. Nestlé is unlikely to rival HUL on size anytime soon. But the question is: Can it become India’s next great consumer compounder?
Its investment case increasingly rests on three pillars. The first is distribution. Over the past three years, Nestlé has built one of the country’s deepest direct distribution networks, which gives the company not just reach, but information.
The second is category creation. Unlike many FMCG companies whose biggest brands enjoy near-universal penetration, several of Nestlé’s businesses—coffee, Maggi noodles, pet food, chocolates and baby—are in the early stages of their growth curves, giving Nestlé an unusual advantage: It is not competing for market share, but trying to expand the market itself.
The third pillar is moving up the value chain, or premiumisation. A consumer who begins with a ₹2 Nescafé sachet may graduate to a coffee jar, ready-to-drink coffee and maybe a premium blend. The same logic applies to much of Nestlé’s portfolio.
Veteran investor Bharat Shah, erstwhile co-founder at ASK Asset & Wealth Management and now in the process of setting up his own fund, has owned Nestlé’s stock for 30 years before exiting recently. He points out that years of rich profits and fat balance sheets have taken consumer companies’ attention away from adequate innovation and continued adaptability, whether in product or category creation, distribution platform innovation or technology adaptation. This is particularly true for MNCs where decision-making happens in headquarters and so they are behind the curve.
He also points to the dramatic changes in the consumer landscape—the emergence of local brands that chip away national brands, changes in the terms of trade due to the rapid advent of Q-commerce and modern trade, and the need to innovate and premiumise. Many categories have high penetration and so volume growth is hard to get.
On the drive back towards Gurgaon, it is tempting to think of Ateli as just another small town on the edge of India’s economic map. But for Nestlé, it represents the future of Indian consumption.
(Published in Forbes India)
admin
July 27, 2026
Vaeshnavi Kasthuril, MINT
Bengaluru, 27 Jul 2026
Over the past six years, Trent Ltd has grown its revenue more than fivefold, outpacing Titan Co. Ltd, Tata Consumer Products Ltd (TCPL) and Voltas Ltd to become the fastest-growing established company in Tata Sons’ consumer and retail portfolio.
Trent, incorporated in 1998, is the youngest among the Tata group’s four major listed consumer businesses. Voltas was incorporated in 1954, TCPL traces its origins to Tata Tea, established in 1962, while Titan was incorporated in 1984.
While Titan remains the group’s largest consumer business by revenue, Trent has overtaken Voltas and nearly caught up with TCPL.
Trent’s revenue rose to ₹20,189 crore in FY26 from ₹3,635 crore in FY20, showed Tata Sons’ FY26 annual report. In comparison, Titan’s revenue expanded 4.2 times, while TCPL and Voltas grew 2.1 times and 1.8 times, respectively. Six years ago, Trent accounted for just 8.6% of the combined revenue of the group’s four major consumer businesses. In FY26, that share has climbed to 14.1%, close to TCPL’s 14.3%.
Trent’s portfolio includes Westside and Zudio in fashion, Samoh and Burnt Toast in newer lifestyle formats, and Star in grocery retail.
Zudio effect
The growth has been driven by Trent’s aggressive expansion across value and premium fashion. Zudio has emerged as the retailer’s biggest growth engine, benefiting from rising demand for affordable fashion among middle-income consumers, while Westside has continued to strengthen its presence in the premium apparel and lifestyle segment.
Zudio has been “a phenomenal driver of revenue growth”, with the retailer aggressively expanding the format over the past few years, said Devangshu Dutta, founder of retail consulting firm Third Eyesight.
He said Trent has also benefited from a structural shift in the country’s retail landscape as consumers increasingly move from fragmented, unorganised markets to organised retail. “The conversion from informal to formal happens not so much driven by demand but by availability. So if you open a new outlet… you have something which was not there earlier, which becomes a magnet for footfall,” Dutta said.
He said that Zudio’s combination of fashion-led products and sharp pricing has helped it stand out in the crowded value apparel market.
The retailer has simultaneously expanded beyond apparel into adjacent categories such as beauty and personal care, home décor, footwear, and accessories through Westside, while also nurturing newer concepts, including Samoh, Burnt Toast, and Star.
During FY26, Trent added 289 stores, taking its total network to 1,286 outlets across 321 cities and expanding its retail footprint to more than 17.7 million sq. ft.
The company said it sees opportunities to increase store density in existing markets while expanding into new cities, particularly as demand for organized retail continues to deepen beyond the country’s largest metropolitan areas.
The next phase of growth is likely to be driven by Westside. According to media reports, Trent plans to significantly accelerate the expansion of its flagship premium fashion chain by opening up to 100 stores annually, nearly double its historical pace. The chain, which had 300 stores at the end of FY26, is expected to expand into newer geographies, including the northeastern states, while strengthening its presence in key metropolitan markets.
Dutta said macroeconomic uncertainty, including the impact of geopolitical tensions and softer employment conditions, could weigh on discretionary spending. “If there is uncertainty, then you tend to be a little bit more careful,” he said.
Dutta said that while consumer demand may fluctuate in the short term, the long-term shift towards modern retail remains firmly intact.
Noel Tata’s farewell message
The FY26 annual report also carries Noel Tata’s final message as chairman of Trent, marking the end of an era for the retailer he helped transform into one of India’s largest fashion retailers.
Tata reiterated his long-held ambition of building Trent into a platform capable of creating and scaling multiple consumer businesses rather than relying on a single retail format. “I have long believed that Trent is not intended to be defined by a single brand, but rather by a portfolio of brands,” he wrote, adding that Westside, Zudio and Star continue to have significant runway for growth.
Looking ahead, he said Trent should aspire to build Indian brands with global relevance and generate a material share of revenues from overseas markets.
He also recalled his vision, first articulated in 2023, of making Trent ten times larger in terms of revenue with commensurate profitability, noting that the company’s revenue and profitability run rate have already grown more than 2.5 times since then.
The company has not yet named a successor to Noel Tata, who is set to retire as chairman in November.
(Published in MINT)
admin
May 25, 2026
Vaeshnavi Kasthuril, MINT
Bengaluru, 25 May 2026
Value fashion retailers across the country are likely to face margin pressure in the upcoming quarters as rising crude oil prices are driving up the cost of polyester and other fabrics. Executives at V-Mart Retail Ltd, Vishal Mega Mart Ltd, and Kewal Kiran Clothing Ltd (KKCL) said crude oil-linked inflation has begun to push up yarn and sourcing costs across apparel and general merchandise categories, with the full impact expected to play out over the next few months.
Value fashion retailers face a double whammy: their heavy reliance on polyester and synthetic blends exposes them to crude-linked inflation, while their price-sensitive customer base leaves little room to pass on rising costs without hurting demand.
Apparel contributes about 22.8% of the overall revenue of the country’s largest retailer, DMart, in FY26. Rising polyester and fabric prices could also weigh on this share, which has been declining since FY20.
“We see almost 60% to 70% consumption of polyester yarn or poly-based product lines, which have or will get impacted,” said Lalit Agarwal during the company’s March-quarter earnings call. Agarwal said that yarn prices had already risen sharply in recent weeks. “There is a rise of almost 10% to 15% in the yarn prices, which effectively converts to almost 5% to 7% in the apparel prices,” he said.
“Cost increases are at multiple points. One, of course, is raw material, which is not only fabric, but also polyester buttons, thread, packaging, all of that,” Devangshu Dutta, founder of Third Eyesight, a consulting firm, said. “Because with value, you cannot really pass on the price hikes so readily to the consumer.”
Dutta said that lower- and middle-income consumers were already under financial stress from broader inflationary pressures, “so, they will not be able to absorb price hikes as easily as well.”
Ebitda margins in Q4FY26 are 10.9% for V-Mart Retail, 13.6% for Vishal Mega Mart and 19.1% for Kewal Kiran Clothing.
Double whammy for value segment
Gunender Kapur, CEO of Vishal Mega Mart, during the company’s March-quarter earnings call, said the inflationary impact had started becoming visible towards the end of April and would likely intensify in the coming months.
Despite rising input costs, retailers said they are avoiding broad-based price hikes on entry-level products amid fragile demand conditions in the value segment.
Entry-level products for these retailers range from ₹199 to ₹399, with some going up to ₹1,500.
“We would never tinker with the opening price points and the lower price points in these difficult times, because those are the customers who are the most vulnerable in inflationary situations,” Kapur said.
Hemant Jain, CEO of KKCL, said the company was willing to absorb part of the pressure on profitability to protect revenues and market share.
Jain also said the company had not yet implemented price hikes despite the inflationary environment.
To cushion the impact, companies said they are increasingly relying on cost optimisation, fabric innovation, premium fashion products and deeper expansion into smaller towns to sustain growth.
V-Mart said it was attempting to offset part of the inflation through alternative fabric usage, sourcing efficiencies and tighter inventory planning.
The retailer has also blocked orders in advance and is utilising existing yarn and fabric inventories available with vendors to soften the immediate impact of rising prices.
Vishal Mega Mart’s Kapur said it has revived cost-saving measures from the post-Ukraine cotton inflation cycle, including replacing cartons with gunny bags, removing polybags from some apparel categories, and shipping footwear without outer cartons.
The retailer has also increased the use of computer-aided design systems to reduce fabric waste during cutting.
Premium products, private labels offer buffer
These value retailers are also increasingly depending on premium and higher-fashion assortments, where consumers are relatively less price sensitive, to absorb selective price increases while keeping entry-level products affordable.
Kapur said Vishal Mega Mart’s large private-label portfolio, which contributes over 74% of its revenue, gives it greater flexibility to manage pricing pressure while maintaining discounts against national brands.
KKCL on the other hand, said it would absorb part of the inflationary impact rather than immediately pass on higher costs to consumers.
These retailers are also increasingly leaning on expansion into smaller towns and deeper markets to drive incremental growth as discretionary spending in larger urban centres remains uneven.
Value fashion retailers have underperformed the broader market amid growing concerns over rising input costs and margin pressure. Shares of V-Mart Retail, V2 Retail Ltd, Vishal Mega Mart and Kewal Kiran Clothing have fallen between 4% and 11% on a year-to-date basis, while the benchmark BSE rose 6.1% during the same period.
(Published in MINT)
admin
December 3, 2025
Pooja Yadav, Exchange4Media
3 December 2025
Over the last few months, India’s e‑commerce and quick‑commerce ecosystem has undergone a wave of structural regulatory and tax reforms. Be it the Goods and Services Tax Council (GST Council) formally bringing “local delivery services” under the tax net with an 18% levy, or the newly implemented labour and social-security reforms expanding obligations for gig workers on aggregator platforms like Swiggy and Zomato, the cost and compliance landscape for delivery and fulfilment is shifting significantly.
The latest GST clarification, delivery fees, packaging charges, and logistics surcharges are now creating a ripple effect across pricing, platform margins, and seller compliance requirements.
The past few months have already shown concrete signals that platforms are revising their incentives, delivery promises, and fee structures. Following the GST clarification, major food‑delivery players have raised their platform fees, for instance, Zomato reportedly increased its per‑order fee from ₹10 to ₹12 (pre‑GST), while Swiggy also raised fees in select markets. Some quick‑commerce arms are also reworking free‑delivery thresholds or fee waiver conditions. Swiggy Instamart also recently updated its free‑delivery threshold to orders above ₹299, with handling and surge fees applying below that level, per reports.
Meanwhile, some platforms seem to be signalling a de‑emphasis on “ultra‑fast for every order” as universally viable; free or fast delivery now appears increasingly tied to higher order values or subscription/membership perks.
It looks like these pressures are forcing platforms to reconsider long-standing quick-commerce levers such as ultra-fast delivery, first-order free offers, zero delivery fees, and flash discounts — which have historically driven customer acquisition and retention.
While Zomato did not comment directly, it referred to the Code on Social Security, 2020 (CoSS), noting that the platform is prepared for gig-worker obligations and does not expect the rules to negatively impact long-term business sustainability.
According to Kapil Sharma of Amazon Ads, “The e‑commerce landscape will continue to evolve, but some fundamentals remain constant such as delivering value to consumers and providing advertisers with meaningful ways to engage. Our full-funnel ad solutions allow brands to focus on objectives such as new product launches, brand building, or promoting larger pack sizes, ensuring campaigns remain relevant and effective even as the ecosystem adapts to changing costs and regulations.”
e4m reached out to Swiggy, Meesho, Zepto and BigBasket for comments, but did not receive responses until the time of publishing.
Several experts told e4m that the economic model of quick commerce, built on heavily subsidised delivery and small-ticket frequent orders, is under pressure. Platforms will need to find sustainable levers to retain customers without eroding margins. The industry has started to see a strategic recalibration where speed is increasingly becoming a hygiene factor rather than a differentiator, free delivery is becoming conditional, and platforms are nudging consumers toward larger baskets, subscription models, curated bundles, and scheduled deliveries. Brands, in turn, are also shifting focus from mass discounting to premiumisation, value-led messaging, and precise cohort-based targeting.
Will Free Delivery Become Rare?
With the new social‑security obligations for gig workers under India’s labour reforms, and the added cost burden of delivery services now subject to GST, the economic logic underlying “free delivery” as a marketing lever is coming under stress. Chetan Asher, Founder and CEO of Tonic Worldwide, echoes this view, noting that quick-commerce platforms previously operated on thin contribution margins and heavily subsidised small-ticket, frequent orders. With rising delivery costs and mandatory social-security contributions, universal free delivery is becoming increasingly unsustainable.
Industry analysts point out that the new social-security mandates and GST on delivery fees have lifted per-order costs noticeably. Most quick-commerce platforms already operate at low single-digit contribution levels, making blanket “free delivery” hard to justify. It may continue, but only as a conditional incentive tied to higher basket values, subscription memberships, or flexible delivery slots, rather than as a universal subsidy.
Shradha Agarwal, Co- Founder & Global CEO, Grapes Worldwide, added from an advertising standpoint, “It’s already happened, brands like Zomato, Swiggy, Amazon and Flipkart, who know we are going to buy from them, have shifted from ‘buy now’ tactics to ‘stay with me’ strategies. Those days are gone when platforms were giving blanket discounts, now brands are the ones tightening their offers.” Citing an example she mentioned how offline pricing is ₹235, but online it is sold at ₹185, with online adding to top-line rather than bottom-line.
On promo hooks like ‘₹0 delivery’, ‘first-order free’ or ’10-minute delivery’, Agarwal said, “As labour codes, compliance costs, and social-security contributions kick in, platforms will have less room to burn cash on promos that don’t create sustainable value. Consumers care more about convenience than freebies.”
On ad spend shifts, she noted, “Offer-driven campaigns will weaken, while value-driven storytelling will rise. ATL and influencer campaigns will strengthen, and performance marketing will become more strategic. Retail media will become non-negotiable.”
From a brand perspective, Asher pointed out that quick-commerce spends are increasingly evaluated against contribution margin rather than sheer GMV growth. Discounts and zero-fee offers are losing bite as customer acquisition costs rise. First-party data, replenishment journeys, and sharper cohort-based offers are gaining importance, ensuring that incentives remain ROI-focussed rather than mass-oriented. Similarly, speed claims such as “0 delivery” or “10-minute delivery” are becoming less differentiating in top cities, where most players already deliver within 15–20 minutes. Consumers now respond better to reliable ETAs, fair fee structures, and transparent pricing than aggressive speed promises.
Adding her viewpoint, Pooja Dhamdhere, Commerce Lead at Starcom India, said, “Incentives like free delivery or first-order offers are likely to evolve rather than disappear, and platforms will explore strategies such as tiered benefits, curated bundles, or differentiated pricing for specific cohorts.”
According to serial entrepreneur Alok Chawla and Founder at Kiko Live, added that while platforms may continue absorbing delivery costs in the short term, the long-term economics will require charging for ultra-fast or low-value orders. “Once platforms pass the actual delivery costs to consumers, we expect order frequency and small-cart behaviour to change, with many users shifting to larger baskets or neighbourhood retailers offering free delivery,” he noted.
Alternative Consumer-Incentive Models
Devangshu Dutta, founder and chief executive of Third Eyesight, who is an expert in the consumer and modern retail sector, stated, “I think platforms will pass a significant portion of the new 18% GST burden on delivery to end-consumers, either through higher delivery charges or repackaged platform fees. Some of this cost may also be clawed back from restaurant partners and quick-commerce brands via revised commissions, slotting fees or mandatory participation in marketing programmes, especially in categories where the platform has stronger bargaining power. Overall, I expect higher minimum-order thresholds and a tighter margin environment for restaurants and small D2C brands that rely heavily on third-party platforms.”
Analysts highlight strategies such as minimum-order thresholds, where free or lower-fee delivery applies only above a certain cart value, nudging consumers to order larger baskets rather than frequent small-ticket items. Subscription and membership-based models are also gaining prominence, offering benefits like waived or discounted delivery, priority fulfilment, and access to exclusive promotions in exchange for a fixed fee.
Scheduled or batch delivery windows are being used to optimise logistics, reduce cost pressure on ultra-fast last-mile fulfilment, and improve operational efficiency. Meanwhile, curated bundles and value packs, including weekly or monthly combos, allow consumers to plan purchases while enhancing per-unit economics for platforms. These levers also enable brands to maintain margin integrity without over-reliance on short-term discounting.
From a marketing perspective, this shift is prompting agencies and creative-first firms to move toward value-led messaging, premiumisation, and cohort-based targeting. Dhamdhere explained, “Platforms are optimising assortments by surfacing premium SKUs, nudging higher average order values, and using search optimisation to strengthen profitability. Brands are now focusing on aspirational consumers with curated bundles, subscriptions, and value-led propositions, rather than mass discounting. Performance campaigns will continue, but clarity of value and sustainable margin-led offers are becoming key for acquisition and retention.”
2026: Will regulatory pressure force a recalibration?
As 2026 approaches, the combined impact of GST on delivery services and mandatory social-security contributions for gig workers is forcing a fundamental rethink of quick-commerce economics. With blanket discounts, zero delivery fees and ultra-fast delivery no longer viable as mass levers, platforms are shifting toward basket-building, subscriptions, curated bundles and conditional incentives. The growth thesis is evolving from “habit formation at any cost” to protecting contribution margins through reliable ETAs, transparent pricing and premium assortments rather than aggressive subsidies.
Brands are recalibrating alongside this shift. Premiumisation, value-led propositions and sharper cohort-based targeting are taking precedence over broad discounting, and campaigns are increasingly evaluated on ROI, repeat behaviour and lifetime value rather than raw GMV. Tiered memberships, scheduled deliveries and subscription-led conveniences are emerging as key retention tools, while short-form video, influencer ecosystems and retail media help articulate value in a tighter cost environment.
Chawla said platforms will have to move beyond “₹0 delivery”, “first order free” and “10-minute delivery” as core propositions because the delivery cost burn far exceeds margins on small-ticket orders. Many consumers currently place multiple micro-orders a day simply because delivery is free, but once fees come into play, behaviour will likely shift toward clubbing orders or reverting to neighbourhood retailers, who themselves are rapidly digitising through partners like Kiko Live.
In the next phase, he adds, free instant delivery will only be sustainable for larger baskets, whereas scheduled delivery may become the default for free delivery, with paid instant delivery as an optional upgrade. Subscriptions may drive loyalty, but only up to a point, since the heaviest users would consume more deliveries than the subscription fee can realistically subsidise, making it difficult for platforms to make the model profitable.
This points to a clear playbook for 2026. “Free delivery” and mass discounting are expected to fade, giving way to conditional, tier-based formats that reward higher basket values, subscriptions or specific cohorts. Brand platform partnerships will also move toward profitability rather than promotional burn, with campaigns designed to protect margins instead of fuelling discount-led spikes.
Taken together, the signs suggest that 2026 will not mark the end of convenience, but the end of convenience that is subsidised blindly. The real test now is who absorbs this new cost of convenience, platforms, brands, or consumers. And as that battle plays out, another tension is already emerging: whether small and regional advertisers can survive the rising cost of visibility in India’s digital economy.
(published in Exchange4Media)
admin
October 24, 2025
Entrepreneur India
Oct 23, 2025
Indian consumers are increasingly opting for private labels and in-house brands over established ones, and retailers are taking note. According to EY’s ‘Future Consumer Index 2025’, more than half of India’s consumers are now choosing in-house brands over legacy labels.
The report highlights that 52 per cent of Indian consumers have switched to private labels for better value, while 70 per cent believe these in-house brands offer comparable or superior quality. Backed by this shift, retailers from BigBasket to DMart, and quick-commerce players like Zepto and Blinkit, are doubling down on their private label strategies, viewing them as a path to higher margins, stronger brand loyalty, and greater pricing control.
“Indian consumers’ growing preference for private labels reflects both short-term price pressures and a longer-term structural evolution in retail,” said Devangshu Dutta, CEO of Third Eyesight, speaking to Entrepreneur India.
Trending globally
The surge isn’t unique to India. A recent report by the Institute of Grocery Distribution (IGD) notes that globally, private labels now account for over 45 per cent of grocery volume and are expanding faster than legacy brands.
In India, this shift is becoming increasingly visible in-store. The EY report found that 74 per cent of consumers have noticed more private label options where they shop, and 70 per cent say these products are now displayed more prominently, often placed at eye level, signalling a strategic retail push.
Commenting on this trend, Angshuman Bhattacharya, Partner and National Leader, Consumer Products and Retail Sector, EY-Parthenon, said, “Consumer behaviour has traditionally evolved in response to changing economic situations, but the current shifts appear to be more permanent. Retailers are confidently launching private labels and allocating prime shelf space to them, while technology is enhancing the shopping experience by providing consumers with limitless options and the ability to compare products.”
From price-fighters to power brands
According to Dutta, private labels are no longer just “copycat” alternatives meant to undercut national brands.
“For retailers, not just in India but globally, lookalike private labels used to be tools at the opening price point to hook the customer, who saw them as credible, affordable alternatives to national brands,” he explained, adding, “However, as retailers have grown, they have gained both scale and expertise to widen and deepen their supply chains.”
Over time, he said, investments in formulation, packaging, and quality consistency have increased consumer trust.
“Private labels now compete on functional benefits rather than only on price, particularly in food staples and apparel, but also in brown goods and white goods, and increasingly in personal care and other FMCG categories,” he added. [Must read: “Private Label Maturity Model”]
Retailers scale up private labels
As demand for in-house brands grows, retailers are scaling up their strategies across sectors.
BigBasket, one of India’s largest online grocery platforms, reported that 35–40 per cent of its FY24 sales came from private labels like Fresho, BB Royal, and Tasties. The company aims to push this share closer to 45 per cent through expansion in frozen foods and ready-to-eat categories.
DMart’s private label arm, Align Retail, has reportedly more than doubled its sales in two years, touching INR 3,322 crore in FY25. The retailer’s in-house brands in staples, apparel, and home essentials have helped boost margins in a highly competitive retail landscape.
Zepto, the quick-commerce player, is taking private labels into the 10-minute delivery domain. Its brand Relish, focused on meats and eggs, has achieved INR 40 crore in monthly sales.
Meanwhile, Reliance Retail has also expanded its portfolio of private labels, including Good Life, Enzo, and Puric, across groceries, personal care, and household products, strengthening its broader FMCG play. In 2024, Reliance Retail’s Tira Beauty also announced the launch of its latest private label brand, Nails Our Way, signifying a major expansion in its beauty offerings.
Capturing a lion’s share in retail
Dutta noted that in India, private labels will remain a core pillar of modern retail strategy rather than a cyclical response to cost pressures.
“Consumers increasingly view retailers as brand owners rather than intermediaries. As private labels mature in branding and innovation, their growth aligns more and more with brand equity development rather than just opportunistic cost-saving,” he said.
From a retailer’s perspective, private labels deliver higher gross margins and greater strategic control, Dutta said. [Must read: “Private Label Maturity Model”]
Another report by the Private Label Manufacturers Association (PLMA), using Circana data, found that in 2024, private-label sales in food and non-edible categories grew faster than bigger brands globally. While figures vary by region and quarter, the pattern remains consistent: private labels are outpacing traditional FMCG growth.
Collectively, these shifts show that private labels are becoming a major revenue driver for retailers in India, and are fast evolving from value alternatives into brands with genuine consumer pull.
(Published in Entrepreneur India)
