Modern trade channel, which was hit the hardest during the pandemic, has begun charting growth recovery in recent months. FMCG companies said they are witnessing improvement in terms of volume growth in the modern trade stores in the past few months driving urban consumption.
As per the latest data released by insights and research firm Nielsen, the modern trade channel clocked a volume growth of 7.8 per cent in the June quarter compared to 5.5 per cent in the March quarter this year. Volume decline in traditional trade channels was pegged at -1.5 per cent in the June quarter.
Mayank Shah, Senior Category Head, Parle Products said, “This year the modern trade channel is witnessing a revival, after two years of decline in growth seen across most modern trade chains. This is not just because of a low base but also because consumers are now frequenting malls and are confidently going out for shopping. We expect volume growth to get stronger in modern trade channel during the second half of the year.”
He added that the modern trade channel’s contribution to the overall FMCG sales remains much higher than the e-commerce channel despite the surge in online sales witnessed by FMCG companies in the past two years. Dabur India’s management in an earning call earlier this month pointed out that urban growth during the June quarter “was driven by new-age channels like modern trade which grew by 42 per cent during the quarter.”
Dependence on kirana stores
During the pandemic waves, consumers had turned to neighbourhood kirana stores for shopping essentials besides online purchases. This had severely impacted the modern trade stores also known as organised trade channels even as these players adopted omnichannel strategies.
“We continued to see strong growth in alternate channels, with Modern Trade channel growing 35 per cent y-o-y and e-commerce channel now accounting for about 8.2 per cent of India business sales,” said Tata Consumer Products in its June quarter earnings release.
FMCG companies have been banking heavily on modern trade stores to push out their premium offerings in urban regions to be able to reach out to the target consumers. Other companies such as Britannia Industries Ltd too stated that the organised trade which had taken a hit during the Covid-19 days has continued to see improvement this year.