Rise of Organised retail and opening up of FMCG space.

Fast Moving Consumer Goods (FMCG) like soap, hair oil, beverages etc have traditionally been sold in small Mom & Pop kirana stores in India. These stores have limited shelf space and working capital. They tend to stock only a few brands in each category. Ideally it is from the well established FMCG companies like Hindustan Unilever, Proctor & Gamble etc.

Traditionally, it was difficult for a new challenger brand to compete against established big names due to the difficulty of distribution spread across thousands of distributors and lakhs of mom & pop kirana stores. Moreover, even if one were to build the reach, getting shelf space for your product in a local kirana store was a challenge given the limited space available.

And distribution is key in FMCG Industry. A product sells only when it is available on the shelf. That has changed with the rise of Organised Retail and E-Commerce. (Organized retail is a sector which consists of the companies which are associated with production or sales of goods and services that operates as private limited organizations which are governed by companies act). Players such as Dmart, Big Bazaar, Reliance Retail etc are example of organised retail.

Challenger FMCG brands can now build scale by first selling through organised retail and later branch out to traditional retail channels. For newcomers, they have to convince only 6-7 major retail chains instead of thousands of distributors and millions of retailers. Brands like Ching’s, Nutella, Ferrero Rocher etc have done it in India.

Brands like Beardo could build niche products and consumer reach through e-commerce channel which would have been very difficult through the traditional route.

This is potential disruption in FMCG distribution space and is happening slowly.

We will increasingly see more challenger brands with more innovation making it to the shelf. Competition is always good for the consumer. As a consumer we have more choices than our elders and this thing is only going to accelerate.

Read more about this phenomenon in this column by Damodar Mall for Forbes.

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