Modern Trade all about win-win partnerships between brands and retailers

The evolution of modern trade has thrown up new challenges for FMCG and food majors. Brands love the space, the visibility and all the benefits that modern trade offers. They have allocated resources towards this new order through dedicated supply chain management, in-store execution, category innovation, and joint business planning with retailers. Still, they are often confronted with issues like margins, space, supplies, promotions, etc.
Considering the massive inflow of new products into the market, retail shelf space allocation is as huge a challenge for retailers as it is for new/ innovative products to get on grocery store shelves.
To tide over such challenges, it is important for brands and retailers to work together as partners. India Food Forum 2017 had a dedicated session – Mega Conclave: Driving Retail Shelves to Higher Profitability – that showcased exemplary cases of collaboration between brands and retailers. The session highlighted some success stories that embody valuable lessons for the F&G industry. Here are the instances of mutually beneficial partnerships that won plaudits and won ringing endorsements from industry mavens at India Food Forum 2017.
CASE STUDY 1
RAW Pressery and HyperCITY: Driving growth and profitability through innovation and collaborative best practices
The successful collaboration between RAW Pressery, a cold-pressed juice start up, and HyperCITY, illustrates how this partnership is driving category expansion and profitability through premium innovation. The partnership started on a small scale in 2015 and has since blazed an envious success story.
Thanks to this partnership, the juice that was once dismissed as a perfect recipe for failure by a retailer has scripted a shining success story. RAW Pressery today is the leader in the juice segment in HyperCITY. The category has grown by 29 per cent, profitability of the category has gone beyond 5 per cent and bill penetration in the category has grown by 11 per cent.
“This wouldn’t have been possible but for the close partnership and relationship we share with HyperCITY,” said Director – Sales, RAW Pressery, Sreejit Nair.
The consumer being the focal point of all activity, understanding the consumer and assessing the change in consumer trends is critical, which is what HyperCITY kept in mind when it picked up on RAW Pressery.
“At HyperCITY, we believe in examining, before launching a category or product, whether it is adding value to our business and if it is addressing the needs of the consumer and also if it is adding any value to the entire proposition of business. When observing the consumer trends for healthier options, we thought why not we capture a new innovative product, something like cold-pressed juices. That’s the best way to put a product on the platform and grow the category,” said AVP – Merchandising, HyperCITY Retail, Y.V. Rao.
Rationale Behind Partnership: Customer Profile
“We believe in supporting start-up entrepreneurs and one of our founding philosophies is that a start-up entrepreneur should get a space in the store to showcase their brands. RAW Pressery is one of the brands, among others, that started with HyperCity and have taken off . Our support for RAW is rooted in the realisation that both of us are looking at customers with a similar profile. Our consumers are modern, experience seeking, cosmopolitan, aware and looking for innovation when it comes to food. They look for new things in the store, which plays to our core positioning – something fresh everyday for our consumers. Innovation plays an important role and we are happy that brands like RAW provide that innovation and experience in the store. And that is the fundamental reason why we support brands like RAW,” said CEO, HyperCITY Retail, Ramesh Menon elaborating on the chain’s successful engagement with RAW Pressery.
The Challenge: Creating Consumer Interest
RAW products are manufactured with high-pressure cold processing, without involvement of heating. They are 100 per cent fresh and pure and retain all natural nutritional value and taste. The product has a shelf life of 21 days and it is free of chemicals or preservatives used for extending the shelf-life. The product is priced three to four times than the regular Tetra Pak cartons available in the market. It has to be maintained between 0-8 degrees at all times and there is clear sedimentation in the packaging.
“Considering its features, incubating a brand like RAW Pressery wasn’t going to be easy,” said Nair.
“By creating awareness, generating and sustaining interest, inducing trials and finally leading to conversions, we were able to address the issue of turning shoppers into buyers,” continued Nair.
Extensive branding, that too disruptive branding, in the category was used to create awareness and consumer interest. “As for trial, we did extensive sampling, which helped identify and address some of the shopper barriers, and led to conversions. It was enough to convince the customers that the premium pricing that they were paying was worth it,” noted Nair.
Brilliant execution and making the product available on the floor and merchandising them with the perfect norm have been the strength of RAW. The product has created a new base with customers thanks to its interaction and energy levels. To disrupt, RAW focussed on being relevant at the point of sale.
“Most retailers have space constraints and understandably so, but HyperCITY has been very flexible. They allowed us space during the weekends to do pop-up sampling and, importantly, extensive branding, and this deserves appreciation,” added Nair.
RAW Pressery believes that more growth will come through innovation and it will be upward of 50 per cent of its current numbers.
“We have hardly seen any failure of our innovation approach in the last six months and we intend to use all the pillars of revenue management. The icing on the cake would be if we increase the bill penetration and profitability of the category between 5 per cent and 10 per cent next year,” shared Nair, while stating his plans and objectives for the future.
Stressing on the criticality of innovation, Menon said, “The most important thing about this is that it adds to category profitability and category revenue. The product has actually grown in the category and made the category more profitable for us. That’s the beauty of the entire strategy, that’s the beauty of innovation. Innovations bring in higher margins and they get the product a higher share of the category. This benefits the brand, the retailer, the consumers and the bottom line of partners. That is our strategy forward.”
VP – e-commerce, Modern Trade & Inst. (CSD/CPC) Business – HUL, Kedar Lele, who was one of the moderators at the session, said the partnership between HyperCITY and RAW Pressery is a great example of building a brand in a store.
“HyperCITY gave RAW space, disruptive visibility and allowed it to create interesting experiences for the consumers; all this helped build a brand inside a store,” he noted.
RAW Pressery today has presence in 900 PoS across nine cities and is poised to grow further in the days ahead.
CASE STUDY 2
Patanjali, Pittie & Reliance: Embracing the entrepreneurial spirit
Patanjali today is the fastest growing FMCG company in India and Pittie Group holds the exclusive rights for modern trade, HoReCa, and also the exclusive GTMT rights for Astha Puja category for Patanjali. Pittie is also the fastest growing FMCG distributor in India.
In October 2013, Patanjali decided to pursue modern trade and Reliance became its first partner. “The spirit of this relationship with Reliance was very entrepreneurial, in which science took a back seat,” said MD, Pittie Group, Aditya Pittie.
The entrepreneurial journey between Reliance and Patanjali took off with a five-store pilot project in Mumbai, which involved building separate FSUs for Patanjali without disrupting the space allocated to the other brands. The stores were also given the opportunity to decide the assortments, including the option of changing them when deemed necessary.
“The aim was to demonstrate how Patanjali as a brand could generate the best RGM for a store and within two months we were vindicated when the FSU for Patanjali had the highest RGM of the five stores,” added Pittie.
Important Takeaway: If there is a brand that shows potential, has conviction, and exudes confidence and commitment, bet on it early. The costs of doing a pilot are less than going for doing any research, and negotiations and debate and pilots also provide considerable empirical evidence.
“Our conviction in Patanjali went up manifold when we learnt first hand about their professional set-up, supply chains and R&D, which was at par with any MNC set-up in the country. A closer look at the customer data, transactional analytics, and source of share gain revealed that betting on this brand assured net growth with absolutely no cannibalization. But the clincher was the high customer loyalty for the products at almost 80per cent,” said Business Head – FMCG, Reliance Retail, Vallabh Soudagar.
Lesson: If your conviction is tested and proven right, scale up rapidly.
The next phase of the journey saw Reliance slaughter a few holy cows of category management. This involved taking many measures – providing a ‘green channel’ for all Patanjali products, Patanjali FSUs as a destination for Patanjali products in the store, then the ‘Funnel Approach’ – moving established products from the Patanjali FSUs to the primary bay to make space for new introductions.
“Taking these steps were necessary because Patanjali was launching new products and categories at a breathtaking pace and Reliance stores with space constraints couldn’t accommodate the SKUs and products without giving the traditional norm of category management a go by. The only thought was customer first and it worked great,” explained Soudagar.
The next stage was how to get the distribution and logistics right. “By adopting the hybrid model of DSD for stores in cities and DC for upcountry locations pan-India, stores were assured of the presence of Patanjali products,” explained Pittie.
Lesson: At every stage of scale, redefine the supply chain model and move ahead.
Reliance Smart stores today have dedicated Patanjali sections and they have managed to create an abundance of display for certain categories and products.
“Now we have moved to a science-based replenishment model because once you decide to scale, that model works,” said Soudagar.
The message is loud and clear: Start entrepreneurially, scale rapidly and then move towards a science-based model for replenishment.
CASE STUDY 3
Heritage Fresh and Zespri International
The collaboration helped make a runaway success of an unknown kiwi fruit; sales rocketed from Rs 33 lakh to Rs 2 crore in a year and overall category weightage for the fruit has grown to 4.5 per cent from .05 per cent some years ago.
Kiwi, an exotic fruit from New Zealand, was never considered a main fruit, even in the fruits category. “I had never considered the fruit in the category,” said Head – Buying and Merchandising (Fruits & Vegetables), Heritage Fresh, K Ravindranath which has 130 supermarkets and a turnover of Rs 650 crore, with fruits and vegetables contributing 15-20 per cent revenue.
The upward trend in the sales of kiwi began from 2012 and sales received a major demand boost in 2015-16. One reason for it was because of the health benefits and its perceived immunity building and improved digestion properties, attributes all too accentuated in times of a viral scare. Kiwi is the only fruit that has more than 30 nutrients in a single fruit. It is a rich source of vitamin C and dietary fibre. It is a natural source of foliate and very good for expecting mothers. Rich in antioxidants and with a low glycemic index, it is good for diabetics. Educating the customers on the health benefits of the kiwi fruit yielded better sales.
“In Heritage Fresh, we started promoting kiwi in 2016 after noticing that its sales was catching momentum. So we decided to focus on it and partner with Zespri for a joint activity and observe the results,” said Ravindranath.
Zespri International is a cooperative company based out of New Zealand and owned by 3,000 growers. “Zespri is more of a marketing arm for growers and we are the only exporters out of New Zealand and supply the best quality kiwi fruits to 53 countries across the globe,” said Country Head, Zespri International, Ritesh Bhimani.
Heritage and Zespri collaborated and undertook several joint management activities such as:
1) Revamp the product promotion and display to generate trial. Reason: Th e penetration of kiwi fruit stood low at .05 per cent – 0.1 per cent and this step was taken to revamp penetration.
2) Revamp penetration by giving attractive freebies. This was expected to increase penetration.
3) Put up special product displays and special FSUs.
4) Put up point of sale material.
5) Incentives were given to store associates.
6) Cross promotions were done.
7) Deployment of exclusive promoters to vet and sample kiwi fruits in the top 30 stores out of the 130 stores for the fi rst few months.
Other than the above measures, a bold decision was taken to start selling kiwis loose without the attractive packaging. Targets were set at the start of the promotion activities in partnership with Zespri.
“Zespri also committed to give us a constant price throughout the season without any fl uctuations so that we could build a category and give a constant price to the customer,” said Ravindranath.
A joint ATL and BTL campaign, besides a customer awareness campaign, was also conducted. Centrespread news on TOI for customer awareness in Hyderabad, Chennai and Bengaluru received phenomenal responses.
“We totally revamped the display of kiwi inside the store and cross promotions with biscuits was also launched,” said Ravindranath.
Results at the End of an Extended Five Month Campaign
In August 2016, the number or kiwi fruits sold were a million, while the number was only 90,000 for August 2015. And for the same period, sales zoomed to Rs 2 crore from Rs 33 lakh earlier.
Key success factors: Good promotion; Consumer price point of Rs 20; Health benefits; Better and focussed display; Operation focus; Sticking to Zespri brand which is known for quality; Consistent supply from distributor.
“This year, our kiwi sales have outsold oranges and grapes. Going forward, we can do substantially better. From 1.5 per cent of the fruit category, we are currently at 4.5 per cent, and next year we expect we can do something like 8 per cent,” said Ravindranath.