When Smaller Consumer Goods Makers Snatched Shelf Space From Market Leaders

Mala’s thought of using public transport to ferry its namesake branded products. It took permission to use Maharashtra State Transport buses for shipping the inventory from its warehouse in Satara, Maharashtra, to Pune and Mumbai. Sales jumped 40% in April and 30% in May, when the lockdown was near-complete, the company said, as it could serve two largest cities of Maharashtra, its biggest market accounting for nearly a third of its sales.

“It would not be right to say that we were not affected by Covid-19 but we were able to mitigate risks through meticulous planning,” Murtaza Mala, partner at Mala’s, said in an emailed response to BloombergQuint. The company, he said, cut marketing and promotional budget but didn’t lay off people.

Consumer firms such as Mala’s struggle to get shelf space as bigger brands pay retailers a premium for the best possible display. The pandemic has been a leveller of sorts. Larger consumer goods makers, with their well-oiled chains for sourcing raw material to delivering final products to stores, maintain lean inventories. For smaller, regional or local brands, that’s difficult and inventory levels are much higher. It turned into an advantage during the world’s strictest lockdown as consumers picked up whatever was at hand.

Smaller companies were able to liquidate their inventory when their larger peers struggled to keep factories open and distribution chain intact, Dhairyashil Patil, president of All India Consumer Products Distributors Federation, told BloombergQuint over the phone. That, he said, gave products of smaller firms significant shelf space.

Wagh Bakri Tea Group, a household name for its namesake branded tea in western and central India, had two months of inventory when the lockdown began and manufacturing stalled.

“Two months of inventory saved us in the initial part of the lockdown,” Parag Desai, executive director of Wagh Bakri Tea Group, said over the phone. “We gave product to everyone and were able to capture shelf space.”

The company spent 30% more than usual to hire trucks to distribute its tea.

Brand loyalty flew out of the window in initial phase of the lockdown, a distributor said on the condition of anonymity out of business concerns. Smaller companies were able to sell inventory, something that market leaders couldn’t, he said.

Damodar Mall, chief executive officer - grocery retail, at Reliance Retail Ltd., through a social media video urged consumers not to be brand- and pack size conscious as it was making sure that essential items were available at its hypermarkets and supermarkets.

For Bagrry’s India Ltd., a maker of breakfast cereals and spreads with an annual revenue of little over Rs 150 crore, sales jumped twofold in certain areas, while some of its channels were impacted due to muted demand or supply-chain disruption.

“There was a definite surge in demand compared with pre-Covid times which was driven by unavailability of other brands across categories and consumers stocking up essential packaged food items,” Aditya Bagri, director at Bagrry’s, said in an emailed statement.

While there’s no panic-buying anymore, most parts of the country are still going through uncertainty of lockdowns and unlocking amid the pandemic, he said. “There has been increased awareness around eating healthy and the importance of building one’s immunity.”

Yet, a surge in sales during the initial phase of the lockdown won’t fully cushion consumer goods makers from the Covid-19 disruption that caused demand to collapse. India’s fast-moving consumer goods sector is not expected to grow in 2020, according to Nielsen India. The market researcher downgraded estimates twice, first from 9-10% to 5-6%, and then in the range of -1 to 1%.

And for smaller brands, competition for shelf space will only get stiffer from hereon as their larger peers return to full capacity and fully repair the distribution network. Mala’s declined to comment on whether it expects the surge in demand to sustain.

Patil said it’s too early to predict a trend. Consumers aren’t brand loyal when it comes to food as it depends on taste, he said. “There is a possibility that consumers may shift to other brands they tried during the lockdown. The trend will be visible only a year from now.”