Locked out of distribution networks, regional brands may find it hard to regain ground

NEW DELHI | MUMBAI: Regional brands have lost both market share as well as volumes by between 5% and 20% over the four months, unable to cope with distribution and last-mile supply challenges, labour constraints and consumer preference for established brands due to trust concerns during the lockdown, according to chief executives of large companies.This is a phenomenon seen among regional brands across categories including soft drinks, biscuits, snacks, honey and tea and reverses a trend of the past two years when they had emerged as a big threat to national players, grabbing market share on lower pricing, hyper-localised products and more attractive trade margins.77453992“Share of local brands has gone down drastically because it was not possible for them to remain at pre-Covid-19 levels in the lockdown months. We see much less competition except from our main competitor,” PepsiCo’s largest franchisee partner Ravi Jaipuria said in an earnings call last week.In large impulse categories like soft drinks, snacks and biscuits, the threat from regional brands had increased till the pandemic struck, and this had made larger companies step up hyper localisation of products and deepen distribution networks.“Yes, there has been share erosion because of various challenges in the lockdown; however, there has also been decline in share of consumption of the entire soft drinks category,” said J. Ramesh, joint managing director of Chennai-based regional cola maker Kalimark group, which sells the Bovonto brand soft drinks.Industry executives said companies with deeper distribution networks, extensive supply chains and broader retail outreach have been able to weather the impact of the four-month-long nationwide and localised lockdowns better.“Regional biscuits brands have dropped about 5% share in the lockdown. Consumers are looking for brands they trust and have known over the years,” the country’s biggest biscuits maker, Parle Products’ category head Mayank Shah said.Executives of regional brands said the setback was temporary and that they expect to revert to pre-Covid-19 numbers within a couple of quarters.Chandu Virani, managing director of Gujarat-based snacks maker Balaji Wafers, which has been a threat to PepsiCo, said: “It’s been a challenging time on many fronts, but that is the case with many brands. We are confident we will revert to earlier levels of business soon.”Branded products account for less than 10% of the overall consumption of staples such as dairy, rice and wheat. In segments such as tea, smaller players and loose tea operators control 40% of the market, with some operating in just one region or district. With rising input costs however, branded tea companies feel bigger players have benefits of scale.In an analyst call last week, Tata Consumer said there will be a competitive advantage for larger branded players with pockets of opportunities vis-à-vis small players."During the lockdown, whoever had a better procurement system and whoever had a better distribution system did make inroads. And yes, there was a supply of tea. A lot of the smaller players were not very sure whether the prices will continue to go up or down. So, they did not refill inventories and waited on the sidelines," Sunil D’souza, MD, Tata Consumer Products Ltd said

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