Minting Money

"Who can scale up AND be profitable in retail?"

Now, that’s a multi-billion-dollar question that Ankit and I were discussing over Chai yesterday. While we did bounce ideas around the two prevalent schools of thought- Value-led approach and Experience-led approach, a conclusive answer wasn’t to be found. Well, you can’t really expect industry-changing insights over a ten-minute discussion during month-end, can you?

Flying on the first day of the new month, with time to think, I connected the above conversation with one that I had with Divya a few weeks ago. We were discussing the assortment of one of NCR’s leading upmarket food retailers. Fascinated by aisles upon aisles brimming with imported food products, the consumption story of India’s elite was in front of us. Yes, there was fancy cheese, the finest cuts of meat, and original Italian pasta sauces but what caught my eye were some tiny premium-looking tins at the check-out kiosk. A closer inspection reintroduced me to ‘Impact Mints’ (IM).

While I had come across them earlier, this was the first time I picked one up. Priced at Rs. 120 for a 14g, they are not cheap by any standards. In fact, they seem like an anomaly, even appearing to be priced out of the market itself. The closest like-to-like mainstream competitor I could find was PVM’s Center Fresh Sugar-Free Mint Candy. At a price per gram basis, Impact Mints are 3x of Center Fresh. But I doubt that the pricing is having any detrimental effect on the sales. Speaking to my friends in Modern Trade (MT) and QuickCom, IM seems to be doing rather well. It might not be the biggest player but its impact on the bottom line is significant.

Occupying just 52 cubic centimeters of space, no wonder it is easy for both MT and QuickCom to stock multiple flavours of the product. IM seems to be checking the holy trinity of Organised retail- Margins, MRP, and Shelf Space. The product seems to have been engineered with this in mind. While it is of German origin, the product gets repackaged in India, thereby reducing the cost of logistics and I must assume customs duty as well. Thus, allowing the importers and marketers a decent size of the pie making it a profitable enterprise.

That brings me back to my original conversation about profitability in retail. People far more capable and smarter than me are working on figuring out a solution. God knows our industry needs it. And, I believe products like Impact Mints can create a winning proposition for all parties involved- the brand, the retailer, and the consumer. But I must admit that what I have mentioned is not a groundbreaking idea, it is actually Retail 101.

Such products can be labeled as Affordable Luxury items. They are substantially more expensive than their mainstream counterparts but in absolute terms, are not so outrageously priced that they’d get eliminated from a shopper’s basket of considerations. A few other examples could be Perfora toothpaste, McVitie’s Thins, Orion’s KSnack Rings (wink-wink), and Raw Pressery Orange Juice (double wink-wink).

The per-order propensity of customers to spend is higher in MT/QuickCom than in the Kiranas. As the price sensitivity of the Indian elite and the aspirational class reduces, a slew of brands can be expected to lap up the opportunity. With time, effort, and perseverance, I am certain we would have products mirroring Ferrero Rocher’s success with volumes that enhance the bottom line. And that just might be the breath of fresh air our industry is looking for.