Question Paper from: RBI Assistant Mains 2017

Paragraph1: Organized retail has fuelled new growth categories-like liquid hand wash, breakfast cereals and pet food in the consumer goods industry, accounting for almost 50% of their sales, said data from market search firm Nielsen. The figures showed some of these new categories got more than 40% of their business from modern retail outlets. The data also suggests how products in these categories reach the neighbourhood kirana stores after they have established themselves in modern trade.

Paragraph2: While grocers continue to be an important channel, for the new and evolving categories we saw an increased presence of high-end products in modern trade. e.g., premium products in laundry detergents, dishwashing, car air fresheners and surface care increased in availability through this format as these products are aimed at affluent consumers who are more likely to shop in supermarket/hypermarket outlets and who are willing to pay more for specialized products

Paragraph3: Some other categories that have grown exceptionally and now account for a bulk of the sales from modern retail are frozen and ready-to-eat foods, pet food, diapers, pre- and post-wash products, hair conditioners and high-end shaving products, besides others. “Win the evolution of modern trade, our growth in this channel has been healthy as it is for several other categories. Modern retail is an important part of our business” said managing director, Kellogg India.

Paragraph4: What modern retail offers to companies experimenting with new categories is the chance to educate customers which were not the case with a general trade store. “Category creation and market development start with a modern trade but as more consumers start consuming this category, they penetrate into other channels, said President, food & FMCG category, Future Group the country’s largest retailer which operates stores like Big Bazaar. Paragraph5: But a point to note here is that modern retailers themselves push their own private brands in these very categories and can emerge as a big threat for the consumer's goods and foods companies. For instance, Big Bazaar’s private label Clean Mate is hugely popular and sells more than a brand like Harpic in its own stores. “So, there is a certain amount of conflict and competition that will play out over the next few years which the FMCG companies will have to watch out for”, said KPMG’s executive director (retail).

Paragraph6: In the past, there have instances of retailers boycotting products from big FMCG players on the issue of margins, but as modern retail becomes increasingly significant for pushing new categories, experts say we could see more partnerships being forged between retailers and FMCG companies. “Market development for new categories takes time so brand wars for leadership and consumer franchise will be fought on the modern retail platform. A new brand can overnight compete with established companies by typing up with few retailers in these categories”, President of Future Group added.

The new growth category products