Mumbai: Retailer D-Mart entered a 2017 ranking of top Indian brands dominated by financial, technology and food companies, in a vindication of its strategy to concentrate on the western region to attract and keep customers.
Ranked 24, D-Mart, with an estimated brand value of $1.19 billion (Rs7,785.57 crore), is the sole retailer in marketing conglomerate WPP Ltd’s ‘BrandZ Top 50 Most Valuable Indian Brands’. Out of D-Mart’s 131 stores, 60 were in Maharashtra and 29 in Gujarat at the end of March, according to the annual report of its parent, Avenue Supermarts Ltd.
“The thing is, there are many such hidden gems in India, what we call hyperlocal brands," said Preeti Reddy, chief executive officer of Kantar Insights, a WPP group firm that provides market research. “These are not national, but where they are, they are like 90-100% (of market) share, and that gives them that power. For instance, in Tamil Nadu, there is this local soft drink, Bovonto, which is giving PepsiCo and Coca-Cola a run for their money. Then there is Balaji chips, which is giving Kurkure (owned by PepsiCo’s Frito Lay) a run for its money in Mumbai."
Which is why it might help new brands to concentrate on their chosen home base rather than rush to become national.
Reddy has a suggestion: “For new brands, just focus on one area, and be very, very strong in that area. Especially in food, where it’s very difficult to have a completely national brand which suits all palates and is loved by everybody. Food tends to become more local."
D-Mart’s success has also defied the established business models in the retail industry, according to WPP.
“D-Mart succeeded in part by countering key retail trends," the report said. “It is opening physical stores when consumers are increasingly shopping online. And it operates hypermarkets when most large-format store operators are reducing their store footprint." The firm also focuses on selling low-margin groceries, staples and fruits and vegetables, which accounted for 54% of the retailer’s revenues in FY16-17.
D-Mart is not alone. Other regional brands have also done well. Gujarat-based snacks company Balaji Wafers has its strongest distribution in the western states of Gujarat and Maharashtra. According to data from Ikon Marketing Consultants, Balaji is one of India’s top five national brands in savoury snacks, behind firms such as PepsiCo and ITC Ltd.
Prataap Snacks Ltd, which recently went public, hit success with its Yellow Diamond snacks, focusing on Madhya Pradesh and Maharashtra. Balaji Wafers has a share of over 60% of the organized savoury snacks market in western India, while Prataap Snacks has 4%, Prataap Snacks said in its red herring prospectus citing research firm Frost and Sullivan data.
Share price of D-Mart parent Avenue Supermarts rose 3.18%, or Rs33.20, to Rs1,077.60 on Friday on a day the Sensex closed flat at 31,283.92 points.