FMCG companies have been tweaking distribution strategies in the wake of sluggish growth witnessed in the general trade (GT) channel in recent times. Some of the leading consumer product companies have reduced of inventories in the GT channel or are realigning the structure for go-to-market strategies for kirana stores. This comes at a time when there is a growing preference for online shopping fuelled by quick commerce platforms.
On Thursday, Honasa Consumer said that growth and profit margins in Q2FY25 were adversely impacted due to implementation of “distribution transition” strategies which involved one-time general trade inventory takeback.
Varun Alagh, Chairman and CEO, Honasa Consumer Ltd, said the company has been focused on implementing Project Neev to optimise its distribution model. “We have taken strategic steps towards transitioning from super-stockists to direct distributors in top 50 cities. This realignment will also strengthen offline go-to-market (GTM) strategy in the quarters ahead, setting the stage for our next phase of growth,” he added.
Earlier, Marico announced that it has kickstarted Project SETU in Q1FY25 to enhance profitability of its general trade partners and expand its direct reach footprint over the next three years.
In the Q2 earnings call, Saugata Gupta, MD & CEO, Marico Ltd, said, “The growth of some of the alternative channels is coming at the expense of maybe kiranas or coming at the expense of Modern Trade. So, we continue to be partnering with them....and it is in our interest that you have a viable general trade system.”
Dabur’s initiative
Meanwhile, Dabur India too said that it implemented a one-time strategic initiative to rationalise inventories with GT channel partners. Dabur India CEO Mohit Malhotra in a recent earnings call noted that new channels are growing ahead of general trade channel. He added that quick commerce players are also putting pressure on general trade and modern trade channels.
“So going forward, this gradual change from GT to MT to e-commerce is something which will endure. I don’t think this is a flash in the pan and will disappear. I think this is enduring here, and this change will come. And how fast, we will have to watch. But GT is a very integral part today and will continue to be an integral part because rural is a huge part of India,” Malhotra said.
For most FMCG players, quick commerce channel has emerged as one of the fastest growing channels and they are witnessing high double-digit growth. Most FMCG players are directly servicing quick commerce channel given the quick replacement cycles for products.