Supermarkets Make a Tryst with Record Sales on Independence Day

Top retail chains posted their highestever weekly sales in the six days to Independence Day, when heavy discount offers lured buyers to splurge on daily household products, apparels and consumer durables.

Retailers such as Future Group, Reliance Retail, Bharti Retail, RPG Group’s Spencer and K Raheja Corp’s HyperCITY — helped by active participation of several consumer product companies — offered deep discounts across product categories to push volumes at a time when consumer spending is slowing and there are fears of poor monsoon rains impacting demand.
“Consumers are looking at savings more than ever before,” said Rakesh Biyani, joint MD of the country’s largest retailer, Future Group, whose 164 Big Bazaar outlets across some 90 cities saw more than 8.1 million visitors during the week ended August 15. “We have been working to integrate our supply chain to bring down prices as far as possible.”
Several suppliers, including Coca-Cola, Britannia and Procter & Gamble, participated in special Independence week deals, helping retailers to offer higher discounts than before.
Darshana Shah, business head for marketing at HyperCITY, a hypermarket format run by Shoppers Stop, said increased vendor participation as well as entire malls going for sales helped pull in the crowds. “The sale was definitely better this year as we had stronger and bigger deals since market sentiment was soft,” she said. HyperCITY also increased its spend on marketing this year at around 2% of overall sales. During the week, Big Bazaar outlets sold more than 1.4 lakh packs of a combination of 5 kg of rice and sugar each with 5 litre of edible oil, and more than 1,500 tonnes of detergent. LED TVs, mixer-grinders and induction cookers were among the other top sellers at Big Bazaar, officials said.
Spencer’s Retail said its same-store sales increased 24% year-on-year during August 11-15, driven by beverages, health and beauty, bakery products and staples that saw over 30% sales growth. Sales of FMCG household products grew over 50% while liquor sales rose 30%, Sanjay Gupta, executive director (marketing & business development) at Spencer’s Retail, said.
Such discounting, however, reflects the escalating pressure on retailers, whose sales are slowing during non-discounted periods. “Because of the slowdown sentiment, consumers have been withholding purchases, so companies are trying to push volumes through discount seasons at retail chains,” said Mayank Shah, group product manager at Parle Products, the country’s largest biscuit maker.
But those volumes come at the cost of bottom lines, he added. Earlier this month, credit rating agency Fitch said same-store sales growth of retailers slipped across lifestyle and value-based formats in the quarter ended June, adding that it expects retailers to combat slowing sales by offering discounts.
“However, this may lead to an erosion of gross margins,” Fitch said, while revising the outlook for the Indian retail sector to negative from stable for the first half of this fiscal due to sustained decline in the discretionary spending ability. A slew of factors such as economic slowdown, deepening crisis in Europe, high food and fuel prices has impacted consumer sentiment in the country, slowing sales of everything from cars to carpets.
Some retailers use inflation as a marketing tool. A case in point is Bharti Retail’s “freedom from inflation” campaign at Easyday stores, which help people fight inflation by providing quality merchandise at low prices. Retailers such as Reliance Retail used the week to increase their customer base. Reliance introduced discount offers such as ‘double the difference’ price guarantees across various product categories.

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FMCG cos ride the fast lane on stable prices.

The fast-moving consumer goods have started moving off the shelves faster in the past two months on stable prices, tempting companies to boost promotional activities and offer products at multiple price points. Key product segments such as soaps, detergents, toothpastes, biscuits, snack foods and soft drinks saw volume growth of more than 20% in April-May 2009, with companies ploughing back savings from lower commodity prices into brand building, consumer discounts and promotions, coupled with improved distribution strategies. In fact, most players have taken a break from their two year-old practice of raising prices since input cost pressures have come down.

The growth rate this year is expected to be volume-led. “Since April this year, we are witnessing an upturn in growth rates. Post-election results and a stable government assuming office, sentiment across corporates, trade and consumers has turned positive,” said Parle Biscuits executive director Arup Chauhan.

These companies are also investing significantly in distribution and tailoring their products and prices to specific geographies as demand picks up in both urban and rural markets. “Both urban and rural growth numbers are encouraging and we are recording our strongest growth in recent years. Buoyed by the overall political stability and expected fiscal stimuli, consumer confidence has picked up remarkably,” said Godrej group chairman Adi Godrej. Rough industry projections estimate growth at 30% in 2009-10. The industry recorded 17-18% volume growth in the last financial year.

Dabur has delivered its best organic growth in a decade in 2008-09 and is optimistic about continued strong performance. “New products contributed almost 20% to the sales growth during the last fiscal and we expect this contribution to go up to 30% in 2009-10,” Dabur COO VS Sitaram said.

Outlining key drivers that have led to growth at Dabur, Mr Sitaram said focus on rural markets in key states, coupled with sharper brand strategies, increasing competitiveness of brand propositions and investment in sales force with the introduction of category-focused teams in top markets worked for the company. Dabur ended 2008-09 with a 17.5% growth in net profit and gross sales of Rs 2,834.11 crore, up 18.3% over the previous year.

With summer setting in, the beverages segment too is witnessing higher sales. PepsiCo is recording a 30% growth in the current quarter against 12% in the same quarter last year. “The beverages arm has been clocking unit case volume growth of 30%, with both carbonated and non-carbonated drinks posting healthy growth,” said PepsiCo India chairman & CEO Sanjeev Chadha. Rival Coca-Cola’s India division has been posting unit case volume growth of 31% — its highest since the pesticide controversy in 2003.

To address healthy rural demand and a cautious urban consumer, companies such as Hindustan Unilever (HUL), Nestle, Procter & Gamble, Godrej and Dabur are shifting focus to volume growth and making higher investments in mass brands. HUL, which had been focusing on premium high-margin products, is now sharpening its mass-products strategy.

Foods companies such as Nestle, Britannia and Frito-Lay have introduced multiple price points to prevent the consumer from downtrading. Latest ACNielsen numbers indicate that low-priced packs are growing faster than bigger ones.

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