<div>The crowded FMCG space, where big brands — national and international — are jostling with a growing bunch of private labels and feisty regional players, has now got one more challenger.<br /><br /><br />On August 15, real estate to financial conglomerate Sahara jumped into the FMCG fray in characteristic grandiose fashion in an attempt to take a juicy bite of the Rs 130,000-crore sector.<br /><br /><br />Chairman Subroto Roy said the group is investing Rs 3,000 crore in its FMCG retail foray, branded Sahara Q Shop. The UP headquarted Sahara has launched 73 branded products in categories ranging from packaged foods to personal and home care. It will begin its foray in 60 towns and cities in Uttar Paradesh, Uttarakhand, Rajashtan , Bihar and Jharkhand.<br /><br /><br />A large part of the sales would be based on “direct to home delivery” model for which Roy said they would be employing a lakh plus people. Roy also talked about setting up neighbourhood Sahara Q Shop outlets to support these sales. Initially 800 such outlets will be opened but the scope was to take it up to 60,000 outlets through the franchise route.<br /> <br /><br />According to Divyaroop Bhatnagar. Managing Director, YFactor, a marketing consultancy , “Sahara's entry is good for the consumer, as the consumer can get better prices and availability. The advantage of Sahara is its vast network of own agents and distribution strength in rural areas,” he said.<br /> <br /><br />But to offset this, he also pointed out that Sahara had no track record in marketing consumer goods, which was a fairly challenging sector. And the direct to home model Sahara was talking about was an untried one. “It will not be an easy entry,” warns Bhatnagar.<br /><br /> <br />While at the moment, the big FMCG brands are viewing Sahara’s entry with more amusement than worry, the action for them is undeniably getting more competitive in India. Despite the sector growing at a CAGR of 12-15 per cent annually, and a projected market size of Rs 230,000 crore by 2015, no longer can big brands afford to sit pretty.<br /><br /> <br />For one thing, there is the growth of private labels. Although current penetration of private labels are fairly low still in India – it's 11 per cent of organised retail sales as opposed to 46 per cent in Switzerland and 40 per cent in UK, according to a report by CII-Y-Factor – they are a growing force.<br /><br /> <br />Private labels have particularly done well in categories that are low involvement – such as home cleaning products, pulses and spices - where consumers are not particularly brand conscious. <br /><br /><br />Going forward, FMCG manufacturers could face another challenge, warns retail consultant Harsh Bahadur, former GM, TESCO (wholesale India), as Modern Trade gets more muscle. Currently in India, the supply chain is controlled by the FMCG manufacturers and they dictate terms to the retail trade. At the recent CII FMCG summit in Delhi, Bahadur mentioned how even a biggie such as HUL was able to only deliver 77 per cent of the Modern Trade's orders, putting them in a quandary. However, he said, as modern trade grows, control of the supply chain will be wrested by the retailers, as has happened in the US. “I foresee that an adversorial position will be taken by retailers against FMCG manufacturers here with bargaining over margins and shelf placements,” says Bahadur.<br /><br /> <br />So what is the lesson in this for FMCG players? Bhatnagar feels they will need to invest in making their brands stronger and exploit their brand power to the hilt, as well as develop better relationships with their retail partners.<br /><br /> <br /><br /> </div>
