Covid-19: Kirana stores hold the key, but may face stockouts

Neighborhood grocery stores are turning out to be a godsend for consumers who are confined to their homes during the lockdown.

“Kirana stores have functioned as a Sanjeevani for Indian consumers. Currently, they are the ones who are active and helping meet consumer demands,” said Navin Tewari, CEO, Capital Foods. The company offers desi chinese and condiments under Ching’s Secret and Smith & Jones brands.

Tewari said the company has witnessed heavy traction in most neighborhood stores, “especially in the North, East and West markets. This confidence and trend of dependence on kirana stores is expected to continue even after the lockdown is lifted,” he told BusinessLine.

Though the prevailing uncertainties and the lockdown had subdued the demand-supply equation over the last month and a half in the case of pure-play food companies, Tewari said a V-shaped recovery in demand during Q3 of this calendar year is expected with some pockets already showing an uptick in demand.

Typically, though ‘aata, daal, chawal’ are looked upon as basic food items, noodles, pasta, snacks and schezwan chutney have become equally mainstream, said Tewari, adding the company has already seen a 50 per cent increase in demand for such products in certain cities.

“In the Eastern part of India, we see good demand from West Bengal, Jharkhand and Bihar, and in north India, from Delhi, Haryana, Uttrakhand, and UP, we are seeing demand revival. Bengaluru is another market where we are seeing substantial growth in demand,” he added.

An intriguing factor is the format of stores. “In the Eastern part, it is small stores that are fulfilling demand, while in cities like Bengaluru the large format stores are highly active. We are observing a very strong connection of neighborhood stores that are catering to consumers across the country, particularly in North and West India,” he added.

Tech to aid kirana stores

The country boasts of some 12 million small and medium neighborhood stores, of which only 25 lakh stores are estimated to be functioning currently.

“These are difficult times,” said Kumar Vembu, CEO and founder of Gofrugal, which offers cloud and mobile ERP solutions, and works with over 5,000 kirana stores across the country. “During the lockdown when there is an urgent need for essentials goods, neighbourhood kirana stores have stepped up their efforts. To empower the efforts of these retailers, we are waiving the cost of their online ordering and delivery management applications till September 30,” he said.

Vembu said the company aims to upgrade all the kirana stores onto a smart platform. The company will help kirana stores set up an exclusive branded android app/iOS app through which consumers can order. The orders will be automatically pushed into the POS making it easier for retailers to measure and improve their capability, while another app will help manage deliveries efficiently.

Nielsen report

A report by Nielsen has also noticed the surge in retail sales among traditional channels. Over the last few weeks, Nielsen has tracked the development of the Covid-19 situation in India and across the world and has identified six key consumer threshold levels that tie in directly to concerns around the outbreak. The thresholds offer early signals of spending patterns, with the agency stating these patterns are being mirrored across multiple markets.

Despite the fact that FMCG retail sales in India during the pre-lockdown weeks was not as high as that witnessed in western markets, brick and mortar (kirana) stores and some e-commerce channels have had a gala run registering unprecedented growth, said the report.

In the first week of the lockdown, however, the growth run turned into a sharp fall, with both modern trade (e-commerce) and traditional trade (kirana) channels showing similar lows. E-commerce and Cash and Carry (organised wholesale) channels also saw growth turning from high positive to negative territory between the last two weeks of March, added the report.

Trying to understand the reasons for the sharp fall in the first week of the lockdown, the agency canvassed 1,240 grocers and chemists from across the country between April 6-12. Stock replenishment and lack of retail manpower were termed key challenges amidst lockdown for FMCG retailers.

The report noted retailers faced severe constraints of stock replenishment as company salesperson visits were severely hit, recording just two salesperson visits a week from an average of 10 visits in a week, on an average, during the lockdown period.

The agency added most of the retailers (65 per cent of those grocers surveyed and 35 per cent chemists) were also procuring goods at higher rates from wholesalers in the absence of regular visits by salespeople. This resulted in 8 out of 10 retailers not receiving adequate stock of products, resulting in some bit of stock outs.

Edelweiss Securities, in a report, also pointed out that though pantry loading of essentials will continue for at least one-two quarters, companies with large summer portfolios like cooling oils, talcum powder, ice creams, etc are bound to see a slide in the coming weeks. While idle stock will continue to remain at depots and warehouses, paucity of truckers is expected to lead to stock outs at kirana stores.