Heat Is On for Fast-
Moving Consumer Goods
Retailing in India
Indian organized retail trade
in fast-moving consumer
goods (FMCG) has been rapidly expanding over the past
decade, drawing much
attention from both domestic and foreign investors.
With a growing domestic
market demand and government policy under development to improve the tax and
most FMCG segments are
poised for further growth. In
the face of stiff competition,
superior supply chain capabilities will be among the
defining success factors for
FMCG retailers in India.
—Viktoriya Sadlovska, managing director of Prameya Research
ndian retail trade in most FMCG categories has seen a growth boom
over the past decade. One common challenge for all of these segments, however, remains the supply chain.
Much has been said about the flaws of the infrastructure in India,
including roads, electricity and water supply, etc. Local authorities are already
investing heavily in infrastructure development. This, however, is unlikely to
address all of the short- to medium-term supply chain needs of the expanding
FMCG and retail sector. To achieve success, these companies need to compete
within the existing infrastructure, which often means additional expenses for
back-up facilities, such as power and water supply, among other needs.
Companies looking to expand in the Indian FMCG retail sector will also face a
daunting challenge of building their end-to-end supply chain capabilities, such as
adequate warehousing and distribution facilities and selecting reliable transportation agents. Agility is the key to success in any FMCG distribution strategy, but in
the Indian context it is especially important to balance agility with risk mitigation
strategies aimed at reducing the impact of frequent disruptions. Such strategies
may entail keeping higher inventory buffers at various stages of the supply chain
or being ready to use alternative transportation means on short notice.
These challenges are exacerbated when it comes to the food supply chain,
leading to a high percentage of produce spoilage. With investment in organized
food retailing growing at a rapid pace, the Indian retail supply chain is on the
brink of an overhaul, aimed at improving quality and reducing waste and costs
throughout the chain. Changes are looming in the ways food is processed,
packaged, stored, transported and presented to the consumer. One major area
of investment is the cold chain, which—once strengthened—is expected to significantly improve both the quality and the shelf life of produce.
With much of the supply chain capacity still in need of development, companies in the Indian FMCG/retail sector have an opportunity to incorporate ecologically and socio-friendly best practices right from the start. Two vast areas of
opportunity (among many) are sustainable packaging and waste utilization.
By adapting supply chain management best practices to the local context, FMCG
companies in India can grow market share and meet changing customer
demands. Incorporating sustainable approaches is a must for companies looking
for long-term viability and competitive differentiation in this market.