Early this year, Gurgaon residents Abhishek Salwan, 33, and his wife decided to cut down on their weekly visits to the local hypermarket and started preparing a monthly grocery list instead for their local grocer.
Salwan is not alone. An increasing number of people are turning to traditional kirana stores to tame rising budgets, in the process impacting the usually resilient fast moving consumer goods (FMCG) sector.
A sector that remained defensive even during the dark days of 2008 is seeing a slowdown this year, especially in modern retail.
As per market researcher Nielsen, the overall FMCG growth numbers for H1 2013 came down to 11%, from last year’s 17%. The impact on modern trade, which contributes about 7% of the total FMCG market, saw growth rate come down to 11% during H1 2013, from 34% in the same period last year. Just two months into the third quarter, the numbers have seen only a marginal improvement owing to the festival season. Modern trade has been growing over 20% over the last few years.
“There is a restructuring in the industry. Sales are lower than last year on a same-store basis. While there is a slowdown, the growth numbers are still in double digits at 12%,” Spencer’s Retail president & CEO Mohit Kampani said, adding, “The major trend is that consumers are not upgrading as they were doing earlier. Further, retailers are not opening newer stores and even pulling out of existing properties.”
“There is a tendency to cut down on discretionary spending,” Third Eyesight chief executive Devangshu Dutta, who runs a retail consultancy firm, said, adding, “In the Indian context, modern trade can end up suffering because it can be perceived to be either more expensive than traditional retailers or consumers feel they are overspending due to wider choices and promotions.”
While the likes of Hindustan Unilever and Future Group were not forthcoming with numbers, sources said till 2012, HUL’s modern trade was growing at 32%, faster than traditional trade at 17%. In H1 2013, the company’s traditional trade is growing faster at 7% while modern trade growth is at 6%.
Take Future Value Retail, the listed arm of Future Group that runs grocery chains such as Big Bazaar and KBFairPrice, for instance. The company’s net sales for the six months ended June was at R3,801 crore, a surge of 4.5% compared to the same period last year even as its