By Sarah Jacob & Writankar Mukherjee
Shoppers at food and grocery retail chains appear disconnected from the overall weak consumer sentiment in the country as they upgrade to premium products and buy bulk packs, helping big retailers and consumer goods firms boost average realisation per sale.
Daily use products like hair oil, refined edible oil and toothpaste, and impulse-driven categories such as biscuits, beverages, salty snacks, instant noodles and chocolates are growing much faster in sales value than the number of units sold in modern trade, a report by market tracker The Nielsen Company says.
Modern or organised retail within food and groceries refers to convenience stores, supermarkets and destination outlets called hypermarkets. This is opposed to the traditional kiranas or neighbourhood stores.
Modern retail shoppers seem to be less impacted by economic factors like inflation, high interest rates and slower growth, says Nielsen’s April report.
Industry officials say this trend also has to do with consumer’s shopping motivations. “Consumers are purchasing larger packs, and more value-added products in modern retail since they are showing a tendency to complete their monthly shopping in such stores. They are topping up with smaller purchases from kiranas,” said Dabur India CEO Sunil Duggal. Value growth of one-litre Real juice pack is almost double in modern retail than kiranas.
Manish Tiwary, executive director-sales and customer development at the country’s largest consumer goods company Hindustan Unilever, said modern retail consumers are comparatively better off. “The profile of shoppers in modern trade clearly reflects a higher living standard measure. This is one of the main reasons for the slightly more premium portfolio (in big chains),” he said. HUL’s largest brands within the personal wash category in modern trade are Dove and Pears, while Lux and Lifebuoy rule the roost overall.
Nielsen says stronger purchasing power of modern trade consumers and wider product assortment at such chains encourages impulse purchases and deal-based large-pack buys. “This mix of affluence and experimentation is an invaluable asset for all stakeholders. This can be useful in times of uncertainty like 2011 since the sharp increases in value growth indicates resilience amongst them,” said Adrian Terron, Nielsen Company’s executive director (retailer and shopper).
He said refined edible oil and instant coffee are examples of categories where value growth outpaced volume growth by 2-3 times. Of course, product prices have increased 2-8 per cent over past year, but Nielsen says the effect has more to do with shopping behaviour.
Spencer’s Retail chief (operations and merchandising) Mohit Kampani said nearly 30 per cent of growth that Spencer’s Retail posted across its 189 outlets was from consumers upgrading purchases last year. “This is also because the price points of products being stocked have widened considerably. A year ago, skincare brands would have been priced between 10 and 800 while today it is between 10 and 2,200,” he said.
Devendra Chawla, president (Food Bazaar category) of India’s largest retailer Future Group, said value-added categories are incubated at modern trade outlets: “A lot more cookies, cream and health biscuits have been launched in the past 18 months than mass biscuits, which makes value contribution higher, although the category is growing double digits by volume.”
Even in personal care, anti-ageing and performance creams are growing much faster than general-purpose creams.
HUL’s Tiwary said it sometimes launch certain pack sizes in modern trade first and then in other channels. Future Group’s Chawla said launch of international foods is also contributing to this trend. This includes packaged cheese, international pasta and brands like Choco Pie among biscuits and Ferrero Rocher in chocolates that are resulting in faster value growth than volume. Overall, modern trade is proving more profitable for marketers because profit margin is higher on premium products and large packets.
Meanwhile, mobile phone and durable makers too report higher sale realisation in large chains due to rising demand for premium products. Research in Motion (RIM), makers of the BlackBerry smartphones, said Indian consumers are upgrading from feature mobile phones to smartphones. “This is boosting the average selling price of the handset market, even though overall demand is yet to pick up,” RIM India Managing Director Sunil Dutt said. He estimates that the smartphones market is growing 60-70 per cent a year in the country, while feature phones at 10-15 per cent.
Panasonic India Managing Director Manish Sharma said: “Consumers are increasingly going for large screen televisions, which is pushing up value sales.” The average selling price of the company’s flat panel TV business has gone up by more than 5 per cent in six months.
Korean brand Samsung too says sales of its high-end split ACs, frost-free refrigerators and smartphones are growing faster than lower-end products.
Source: The Economic Times
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