FMCG Companies Focus on Reviving Sales in Kirana Stores Amid Challenges

Indian Retailer - How to Ease FMCG Asset Management Challenges in Retail?


Fast-moving consumer goods (FMCG) companies like Marico, Dabur, Emami, and Bajaj Consumer are facing a slowdown in sales at traditional kirana stores. Several factors contribute to this, including fewer product launches in kiranas compared to e-commerce and organized retail, a decrease in credit availability from distributors, and weakening rural demand. Kirana stores continue to constitute a significant portion of FMCG sales in India, accounting for four-fifths of the total sales.

To address this challenge, these FMCG companies are reevaluating their approach and reinvesting in kirana stores, anticipating an improvement in consumer sentiment in rural areas in the coming quarters. Their strategy involves focusing on both traditional and modern channels for growth, recognizing that both have unique strengths and can coexist successfully.

Analysis of this news for a layman:

Fast-moving consumer goods (FMCG) companies, which produce everyday products like packaged foods, personal care items, and cleaning products, are facing a sales slowdown in traditional kirana stores or neighborhood shops. This situation is concerning for companies like Marico, Dabur, Emami, and Bajaj Consumer. Several reasons contribute to this slowdown, including the fact that fewer new products are being launched in these stores compared to e-commerce and large retail chains. Additionally, there has been a decline in the availability of credit from distributors, and the demand in rural areas has weakened.

To tackle this challenge, these FMCG companies are now focusing on revitalizing sales in kirana stores. Kirana stores continue to play a crucial role in India’s FMCG industry, accounting for the majority of FMCG sales in the country. Company leaders believe that this renewed focus will pay off, especially as they anticipate an improvement in consumer sentiment in rural areas in the coming months.

Marico’s Managing Director, Saugata Gupta, emphasized the need to reinvest in traditional trade (kirana stores) to stimulate growth in the sector. He pointed out that while e-commerce and modern retail have seen significant growth in recent years, traditional trade remains a vital part of the FMCG landscape.

One of the challenges contributing to the slowdown is the reduction in credit availability from distributors to kirana stores. This shortage of credit affects the ability of kiranas to stock up on products, creating a cycle of declining sales and squeezed credit.

It’s worth noting that modern retail chains saw a 19.5% year-on-year growth during the September quarter, while traditional trade grew at a slower rate of 7.5%. However, this growth is partly attributed to a low base from the previous year when sales had fallen. Data also suggests a decline in the number of kirana outlets in recent months.

Inconsistent demand and excess stocking have led to deep discounts to clear excess inventory. Distributors are cautious about extending credit to kirana stores due to delayed payments, particularly for products with lower sales velocity, such as personal care items.

Original Analysis:

The slowdown in FMCG sales in traditional kirana stores reflects the evolving dynamics of India’s retail sector. While modern trade and e-commerce have made significant strides, traditional trade remains a dominant force. The challenges faced by FMCG companies highlight the need for a balanced approach to reach consumers effectively.

One of the key issues contributing to the slowdown is the declining availability of credit to kirana stores. The reduced credit flow affects the ability of these small retailers to maintain their inventory levels, leading to lower sales. This problem is further exacerbated by delayed payments from consumers.

To address this, FMCG companies must work closely with distributors to ensure a healthy flow of credit to kirana stores. Strengthening distributor-retailer relationships and streamlining payment cycles can help in this regard.

Another factor affecting FMCG sales in kiranas is the limited number of new product launches in these stores. E-commerce and organized retail have seen a flurry of product introductions, attracting consumers with novelty. FMCG companies need to consider strategies for launching new products effectively in traditional trade, leveraging their existing strengths and relationships with kirana store owners.

The anticipated improvement in consumer sentiment in rural areas is a positive sign for FMCG companies. Rural markets have historically been a significant driver of FMCG sales in India, and a revival in these areas can reignite growth. However, companies must tailor their product offerings and marketing strategies to resonate with rural consumers.

Additionally, the coexistence of traditional and modern trade channels is essential. Each channel caters to different consumer segments and offers unique advantages. Companies that can strike the right balance between these channels are likely to succeed in India’s diverse retail landscape.

Impact on Retail Investors:

Retail investors should pay attention to the challenges faced by FMCG companies in traditional kirana stores as they can have indirect effects on investments:

  • FMCG Stocks: Investors with holdings in FMCG companies should monitor how these companies adapt to the changing retail landscape. Companies that successfully navigate these challenges and revitalize their sales in kirana stores may present better investment opportunities.
  • Retail Sector ETFs: Retail sector exchange-traded funds (ETFs) could be influenced by the performance of FMCG companies. If these companies implement effective strategies to boost sales in traditional trade, it could positively impact the broader retail sector.
  • Consumer Sentiment Indicators: Retail investors can also look at consumer sentiment indicators, particularly in rural areas. Improving sentiment in these regions may signify increased consumer spending, benefiting FMCG companies and related investments.
  • Market Volatility: The challenges in the FMCG sector could contribute to market volatility. Investors should be prepared for fluctuations in FMCG stock prices based on the sector’s performance and news related to kirana stores.
  • Diversification: As with any investment strategy, diversification remains crucial. Retail investors should consider a mix of assets in their portfolios to spread risk and potentially offset the impact of challenges in specific sectors.

Impact on Industries:

The challenges faced by FMCG companies in kirana stores can have ripple effects across various industries:

  • Distribution and Logistics: Companies specializing in distribution and logistics services may experience changes in demand as FMCG companies work to address credit and inventory challenges in traditional trade.
  • E-commerce: E-commerce platforms could see increased competition from FMCG companies aiming to strengthen their presence in online retail to compensate for the slowdown in kirana stores.
  • Consumer Goods Manufacturing: Manufacturers of consumer goods, including FMCG products, may need to adjust their production and supply chain strategies based on changes in demand from traditional trade.
  • Retail Technology: Companies offering retail technology solutions may find opportunities to support FMCG firms in optimizing their operations in both traditional and modern trade.
  • Market Research and Analytics: Providers of market research and analytics services may witness increased demand as FMCG companies seek insights into consumer behavior and preferences in various retail channels.

Long Term Benefits & Negatives:

The long-term benefits of FMCG companies refocusing on kirana stores include:

  • Market Resilience: Strengthening traditional trade can enhance the resilience of FMCG companies by diversifying their sales channels and reducing reliance on e-commerce and modern retail.
  • Rural Growth: Anticipated improvements in rural consumer sentiment can lead to sustained long-term growth for FMCG firms, especially if they can cater to the unique needs and preferences of rural consumers.
  • Consumer Outreach: A renewed emphasis on kirana stores allows FMCG companies to maintain a direct presence in local communities, fostering stronger consumer relationships.

However, potential long-term negatives include:

  • Competitive Challenges: FMCG companies will face intense competition, both from other FMCG firms and from e-commerce players, in the kirana store segment.
  • Supply Chain Complexity: Managing inventory levels and credit terms across a diverse network of kirana stores can introduce complexity into the supply chain.
  • Technology Adoption: FMCG companies may need to invest in technology solutions to streamline operations in kirana stores, which can be a long-term financial commitment.

Short Term Benefits & Negatives:

In the short term, FMCG companies may experience the following:


  • Immediate Sales Boost: Implementing strategies to revitalize sales in kirana stores can lead to an immediate boost in revenue.
  • Cost Optimization: Streamlining credit and inventory management can result in cost savings and improved profitability.


  • Transition Costs: Adapting to the challenges in kirana stores may require initial investments, impacting short-term profitability.
  • Market Competition: Rapidly addressing these issues could lead to increased competition and potential price wars, negatively affecting profit margins.

Companies will gain from this:

Companies that may benefit from FMCG companies’ efforts to revive sales in kirana stores include:

  • FMCG Distributors: Distributors that can provide flexible credit terms and efficient inventory management solutions to kirana stores may see increased business.
  • Retail Technology Providers: Companies offering technology solutions to optimize operations in traditional trade could experience heightened demand.
  • Consumer Goods Manufacturers: Manufacturers that can quickly adapt their product offerings and distribution strategies for kirana stores may gain an edge in the market.

Companies which will lose from this:

Companies that could face challenges due to the revitalization of kirana stores by FMCG companies include:

  • E-commerce Platforms: E-commerce platforms may encounter increased competition from FMCG companies entering the online retail space to compensate for the slowdown in kirana stores.
  • Modern Retail Chains: Large retail chains may experience heightened competition from traditional trade, particularly if kirana stores successfully rekindle consumer interest.

Here is a comprehensive list of companies that could be affected by the news article, along with a discussion of how the news article could impact market sentiment towards these companies:

Companies Affected by Slowing Growth in Kirana Stores

  • Fast-moving consumer goods (FMCG) companies: The slowing growth in kirana stores could have a negative impact on FMCG companies, as kirana stores account for four-fifths of total FMCG sales in India. Companies that are particularly reliant on kirana sales, such as Marico, Dabur, Emami, and Bajaj Consumer, could be more affected by this trend.

    • Potential Impact on Market Sentiment: FMCG companies could see a decline in their share prices due to concerns about slowing growth in kirana stores.
  • Distributor companies: The decline in credit from distributors to kirana stores could have a negative impact on distributor companies, as they may have to extend more lenient credit terms to keep their customers. This could lead to an increase in bad debts and lower profits for distributor companies.

    • Potential Impact on Market Sentiment: Distributor companies could see a decline in their share prices due to concerns about rising bad debts and lower profits.
  • E-commerce and modern trade retailers: The slowing growth in kirana stores could benefit e-commerce and modern trade retailers, as these channels are seeing faster growth. Companies such as Reliance Retail and D’Mart could see an increase in sales as consumers shift away from kirana stores.

    • Potential Impact on Market Sentiment: E-commerce and modern trade retailers could see an increase in their share prices due to expectations of faster growth.

Overall Impact on Market Sentiment

The news article is likely to have a mixed impact on market sentiment. FMCG companies and distributor companies could see a decline in their share prices due to concerns about slowing growth in kirana stores. However, e-commerce and modern trade retailers could see an increase in their share prices due to expectations of faster growth.

Additional Insights:

The dynamics of the Indian retail sector are continually evolving, with traditional trade, e-commerce, and modern retail coexisting and influencing each other.


The challenges faced by FMCG companies in traditional kirana stores emphasize the importance of adaptability and balance in the retail sector. Successfully addressing these challenges can lead to sustainable long-term growth, benefiting both FMCG companies and investors. Monitoring consumer sentiment in rural areas and developments in kirana stores will be crucial for assessing the impact on the FMCG sector and related industries.

Source: “FMCG Cos Chart Fast-Moving Sales Growth Path for Kiranas,” Economic Times, Nov 28, 2023, URL.

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