The New Avtar

(Retail 3.0)

BY
Abhishek Singh 9202
Rahul Sinha 9255
Ritesh Ranjan 9246
Abhishek Kumar Singh 9363
After boycotting Cadbury in 2008 over margin differences,this time it’s
Kellogg’s at the receiving end. The country’s largest retailer has decided to
boycott the breakfast cereal brand across various retail formats after the US firm
turned down its demand for higher business margins. 

Future Group will sell the existing inventory of Kellogg’s in its stores such as
Food Bazaar and Big Bazaar, but will not take new stocks from next week, a
company official familiar with the development said. Accroding to Kishore
Biyani, CEO of Future Group, said, “We believe in collaborative relationships
to build demand and consumption. Both sides have to understand each other’s
needs and work together to drive growth.” 

In retaliation, manufacturers are working closely with the traditional trade that
is contributing higher growth in recent months, according to industry estimates.
Companies are passing on a lot of margins to the traditional formats through
discounts and promotions, which may have upset modern retailers.

Acording to me the fight between Big Bazaar and Kellogg's ,and it is not first of
the kind that Big Bazaar is involved in , some time back it was with Cadbury’s
and even before that it was Lay's. All the three were removed from the shelves
of Big Bazaar, and reasons given were the differences Big Bazaar had with the
margins that were being given.

Some people might see it as a normal routine affair, bargaining between two
parties for better margins, but it is not. It is part of the larger plan which big
Bazaar has and the reality which marketers are walking into, the world which
will be dominated by Dealer owned labels. In the news you can also read about
how Big Bazaar is not too worried about the fact that Kellogg’s would not be
there on its shelves, it has it's own Brand Tasty Treat which would be there as
an substitute.

Now the typical FMCG marketer in India is used to be on a enviable position,

the retailer being small and unorganized and at the mercy of the Brand
marketers, who could afford to play from the position of strength. But this all
will change in the near future.

According to Mr Manish Tiwary, who heads the Modern trade Division at HUL.
a the division which deal with the organized retailers like Big Bazaars,
Spencer’s and he shared his concerns how the dealer brands increasingly put
pressure on the brand marketers. He said that the time when you could keep
getting more customers just on the basis of cosmetic improvements to your
brand is more or less over, and only those brands which have a very strong
proposition and value for the customers will be able to survive.

Though in India the proportion of organized trade itself is very small and the
proportion of the business of dealer owned labels even smaller, but one can see
these events giving us a preview of the future holds for brand marketers.

However, what is important is the fact that Big Bazaar and all the major retail
chains in India are looking out for means and working towards increasing the
sales of the private labels. Although private labels might be comparatively less
expensive and easily available in those stores, such steps kill the freedom of
choice of many people. I am afraid that the big brands do not cartel together and
boycott the organized Indian market altogether. In that case, the loser will be no
one but the Indian consumer.