Top 10 consumer firms dominate wholesale cash-and-carry segment

Organized wholesale is now a Rs6,800 crore business, growing 13% in the first six months of 2016 from a year earlier

Customers at a Wal-Mart India wholesale store in Zirakpur, Chandigarh. Photo: Bloomberg
Customers at a Wal-Mart India wholesale store in Zirakpur, Chandigarh. Photo: Bloomberg

Branded goods from India’s top 10 consumer packaged goods (CPG) companies dominate the emerging wholesale cash-and-carry business in the country, insights provider Nielsen said on Wednesday.

Only 3% of small manufacturers make use of the wholesale cash-and-carry channel, said Vijay Udasi, senior vice-president of Nielsen India, which launched Scan Track Cash and Carry, a service to provide insights into the emerging organized wholesale business.

Udasi explained that this has led to the top 10 manufacturers accounting for 60% of the total organized cash-and-carry sales. These manufacturers, however, account for only 38% of total retail sales, he added.

Organized wholesale, which was negligible five years ago, is now a Rs.6,800 crore business, growing 13% in the first six months of 2016 from a year earlier. To be sure, it is still small, accounting for just 2.6% of the overall Rs.2.71 trillion CPG market, which grew at 7% in the same period.

“The channel may be considered relatively new in the country, but its contribution to all of CPG shows how critical it is from a measurement perspective,” Udasi said.

“However, organized wholesale is present in only 12 states and in these states, if you look at key categories, they are already gaining scale. So, for instance, categories like soaps, edible oil, washing powder get 10-12% of their sales from cash and carry,” said Udasi.

Moreover, within the 12 states, Punjab, Andhra Pradesh and Maharashtra together account for over half of organized wholesale sales. So, the penetration of organized wholesale trade is higher in these states as compared to the rest of India, said Nielsen.

Also, unlike the traditional trade, which consists of 9.6 million kirana stores, the overall organized wholesale cash-and-carry trade consists of four large companies—Metro Cash and Carry India Pvt. Ltd, Wal-Mart India Pvt. Ltd, Reliance Cash and Carry, a unit of Reliance Industries Ltd, and Booker Wholesale, a subsidiary of UK’s Booker Group—which together have 92 stores.

In the traditional sales channel, Nielsen has a panel of 40,000 stores from which it collects sample data and makes estimates and projections for an all-India level, whereas organized retail allows the company to capture data from the retailer, which is more accurate.

In the past, CPG companies like Hindustan Unilever Ltd, Godrej Consumer Products Ltd and Dabur India Ltd had shared their discontent with the insights provider over data that did not reflect the real picture.

“Whenever there have been concerns, we have worked with manufacturers to understand where the disconnect is happening,” said Udasi, while explaining that sometimes the issue is due to a lag, given the complex nature of distribution of traditional trade.

Meanwhile, a number of start-ups have come up in the past couple of years that are doing digitization work at kirana stores which is accessible to the larger CPG companies. However, “it is still a small base, but far more reliable”, said Abhishek Malhotra, partner at consulting firm A.T. Kearney.

Earlier this year, Nielsen redeployed its retail panel as per Census 2011 to reflect the growth of the metros and large cities. Earlier, the panel had been configured based on the 2001 census.

“The redeployment has helped us in better understanding the gaps that manufacturers need to address in these markets in terms of distribution and penetration and also consumption trends in metros as these cities have seen a higher growth in population at 3.5% as compared to all-India population growth at 1.2%,” said Udasi.

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