The products that leave shelves the fastest; fetch the fastest returns in retail market. Let us explore the changing face of Fast Moving Consumer Goods (FMCG) in India and how franchisors are trying to enhance their business in this zone.
The demand for Fast Moving Consumer Goods (FMCG) is a never ending phenomenon. Local vendors serve the daily needs of Indian customers to much extent. Owing to this reason, established FMCG retail chains have not been able to experience a constant growth in the Indian market. They have witnessed an increasing graph, reaching a certain top level – its point of inflexion, from where it starts declining. But the market is ripe, as according to Indian Brand Equity Foundation, the FMCG sector has grown at an annual average of about 11% over the last decade. The overall FMCG market is expected to increase at Compounded Annual Growth Rate (CAGR) of 14.7% to touch US$ 110.4 billion during 2012-2020. To avail the most of this opportunity, franchise FMCG brands are following various means to expand their reach.
Franchising can help the brand to open centres pan-India. However, collaborating with a brand that has already established its base can help the brand in gaining a larger share of the market. Recently, Future Group and PatanjaliAyurved announced a marketing partnership with an objective of growing the popularity and access for health-positive, ayurvedic FMCG products amongst millions of consumers in India. Future Group shall promote, distribute and market PatanjaliAyurved products at their modern trade counters. Expressing his views Swami Ramdev of Patanjali said, “Our Patanjali is truly a brand that is made in Bharat, made for Bharat and made by Bhartiyas.”
Kishore Biyani, Group CEO, Future Group added, “Together with PatanjaliAyurved, we feel we can create a strong swadeshi alternative to all daily usage goods that we in Bharat consume.”
International brands gaining ground
International FMCG brands have given a new form to the market and they are a big boost to the Indian brands also. WHSmith, one of the leading store chains of the UK is looking forward to open 300 stores in India by the year 2022. First WHSmith store was opened in India in 2010 by Travel News Services India Private Limited (TNSI) as a part of its franchised ventures. TNSI is the Master Franchisee for WHSmith's retail operations. TNSI successfully operates 70+ retail stores across India, besides six stores at T3 IGI Airport in Delhi, four stores at Cochin International airport, six stores at Hyderabad International airport, 25 stores at Delhi metro and Airport metro stations, 12 stores at Mumbai metro stations, and one store at Fortis Group of Hospitals. The brand intends to expand its presence in India via franchising model and offers franchise opportunity to franchisees via its two formats; convenience store and convenience kiosk.
Walmart, a US-based chain had opened its 21st store in India in August at Agra and had declared its plan to open 50 wholesale outlets in the country within four to five years. Recently, it declared its plans to open an outlet in 2017 at Punjab. "We are working on several sites right now. We have signed quite a few properties. I do expect the next one will be in Ludhiana in Punjab," said Krish Iyer, President & CEO, Walmart India.
Mergers and acquisitions for growing footprint
A step ahead of franchising can be joining hands with a brand that will help in achieving economies of scale. The acquisition of Nilgiris by Future Consumer Enterprise Limited (FCEL) was a step undertaken towards geographical expansion of the convenience store network in Southern India, to enable FCEL’s footprint to traverse over North and West India and grow beyond these areas. Kishore Biyani said, “FCEL’s acquisition of Nilgiris, a food and grocery convenience store chain of South India, having a unique portfolio of food brands supported by its own manufacturing facilities for dairy and bakery, is another step towards building a robust convenience store network in India. This acquisition is synergistic as it enables strengthening and expanding convenience stores through franchisees in an asset light model as well as brings in new manufacturing capabilities and brands within the company.”