"Tech. Enabled Micro Hubs" of Savory Snacks have evolved. Will they sustain growth?"

Young and aspirational Indian customer's preference for on-the-go dry savory snacks has gone several notches up during the last two decades. What has changed during these years? Foreign brands entered Indian market and local large companies made their products available across the country using traditional FMCG distribution channel, mid size local companies expanded their reach in their city / state, brick-and-mortar shops & manufacturers were forced to adopt electronic platform to meet growing customer needs of online orders of snacks coupled with e-tailers and food delivery apps made it easy for customers to order online. All these changes has made the Savory snacks market very interesting & competitive. However, evolution of "Technology enabled micro hubs" playing a role of aggregator like market place e-trailers, keeping inventory like shops, providing home deliveries like food delivery/e-commerce and serving customers like no other channel does, which has truly helped customers in many ways. Below is the sketch to compare all options of order/delivery customers have right now;

1. Manufacturers sell through their own outlet:

In early years (before 1990's) manufacturer of savory snacks used to make fresh "farshan / dry snacks" & sell from their own shop. "We have no other branches" used to be a matter of proud in those days, this choice of manufacturers was forcing customers to visit this particular shop to buy snacks, even though it was not convenient to them. This type of operation also restricted Namkeen / Farshan maker to one or few shops in their city/town, hence, limiting their turnover and growth. Only few producers of high quality and tasty snacks survived during the last two decades due to customer loyalty, as customers were so fond of those products and shops, they were ready to stand in a long queue to buy from these shops. Most of those shops were forced to change their operations to stay relevant and survive due to change in competition, market & customer needs.

2. Manufacturers sell through own local stores or through their own e-portals

To grow operations from one shop and to reach out to more geographies, manufacturers opted for the route of opening more outlets on their own, started giving franchise and also developed their own website/portal to make it easy for customers to order. This type of operation required very different competencies and resources, hence, only a few of those manufacturers were successful and achieved growth. Many manufacturers continue to remain a small shop operation what they used to do 20-30 years ago, same scale & size.

3. Manufacturers sell through distributor, wholesaler & retailer (FMCG distribution Chain)

As foreign brands entered in the Indian market of ready to eat savory snacks, local manufacturers of Namkeen recognized the opportunity. Other factors like development of infrastructure, road / rail transportation, technology in packing, manufacturing automation and more retail outlets due to growth in FMCG, helped brands to utilize traditional distribution chains to ensure their products would be available across the country and not restricted to their own city / state geographies. Several brands like Balaji, Bikaji, Haldiram etc. took this route to expand their operations to most parts of the country. Only a few large companies could do it, as it required huge sales, marketing, promotional expenses and manpower to establish & maintain a distribution network.

4. Manufacturer/Retailer sell through e-commerce / delivery apps

E-commerce, e-tailers and mobile based delivery apps brought a revolution in the way customers order and get delivery of Savory Snacks. Even small retailers / shop owners too started getting orders of their Savory Snacks / Namkeen products. No or very low delivery charges, offers, discounts, and 24 x 7 ordering helped customers to order food items online.

5. Manufacturer sell through organized retail stores outlets

Before e-commerce, e-tailers, e-grocery stores and mobile based delivery apps became popular, organized retail chain stores like D-mart, Reliance Retail, Big Bazaar, More etc. also started keeping Savory snacks products in their store. They offered huge discounts because of direct sourcing from manufacturers, getting slotting fees to dispatch these products inside stores and low cost operations. This helped customers to buy savory snacks in bulk at huge discounts (stores offered products at price significantly lower than MRP, which no other local retail shop could offer).

6. Tech. Enabled Micro Hubs

Emergence of Technology Enabled Micro Hubs and growth really surprised everyone. These entrepreneurs offered selected products of high quality, good taste and often well known brands not easily available in local grocery shops or organized retail shops. These hubs used social messenger platforms like Whatsapp Business, Facebook Business Pages and online stores like "quicksell", "dukan" etc. to reach out to customers, display product catalogue, prices and also take orders online. These hubs accept online orders, schedule delivery time, receive payment online through UPIs and also home delivered products.

Reasons of Tech. Enabled Micro Hub's success:

Technology enabled Micro Hubs are agile, flexible and customer centric. These hubs offers unique features of other alternative channels all at once. These hubs are changing the way customer order and consume food.

a. Home delivery of orders save customer's time & money (feature like e-tailers, e-grocery stores & delivery apps do)

b. Niche product mix, keeping inventory and convenience that helps customers in product selection, availability (feature like Retail shops & Organized Retail Chain Stores)

c. Online catalogue, quick response through messenger, online order taking & instant support at the touch of the button, best CRM that no other options can really offer.

d. Value for money price to customer as hubs keep their operational costs and margins low and even tough incur last mile home delivery & transportation cost offer products at MRP like Kirana stores / retail shops.

e. Regular updates about new products, new brands, special of the day/week, offers, discounts through broadcast messages / groups on social media platforms, helps customer to

Road Ahead:

One can't live with out food, not just basic food items, but the food one likes and feel nostalgic that makes person happy and also lighten-up the mood. Thanks for the rise of food-tech startups, technology enabled micro-hubs and e-tailers, food delivery apps at the click of a mouse or a tap on cellphone screens, we can get items home delivered. Unicorns like Zomato, Swiggy have attained huge success, overall food-tech & servie industry has been quite hot right now, as there are 1500+ startups and thousands of Technology enabled micro-hubs are serving customers.

Small businesses struggle to be discovered on larger ecommerce platforms, their scale doesn't permit them to invest in digital marketing and drive traffic to their web portal or fb page. Hence, emergence of Technology enabled micro-hubs and their growth during last three years is very impressive. Technology enabled micro-hubs offer convenience, value for money price, ready stock of products, home delivery, online order & payments, fastest response to customer query, best customer relationship management processes, niche products mix etc. Hence, they are bound to be successful and can achieve higher growth rate. Though, these micro-hubs in no way can threaten any of the other alternative distribution channels today, these hubs can certainly impact some portion of sales revenue of retail shops, organized retail chain shops or e-tailers, delivery apps. There is a huge scope in opening more such Technology Enabled Micro-hubs in the Savory Snacks market segment, as other alternative channels are not able to meet growing needs of aspiration young customers.

........................................................................................This article is authored by Ketan Gandhi, CEO, KgGuruji.com based on primary research conducted by him during last two years and based on his company's retail division's hands on experience in retail distribution of Savory snacks in Pune region.