Market Mix - How Kirana Stores Are Fighting Back

September 10, 2024 | Listen Online | Read Online

Good morning. Walk into any mom-and-pop grocery store in your locality and they’ll tell you that quick commerce giants such as Blinkit, Swiggy Instamart and Zepto have eaten into their business. But they’re not giving up yet. Local kirana stories have certain advantages they’re leveraging to keep up with quick commerce. Read on to know more.

The Indian Institutes of Technology (IITs), Indian Institutes of Management (IIMs), and the All India Institute of Medical Sciences (AIIMS) are premier places to get a degree. But are they losing their brand value?

DECODE THE NEWS

How Small Kirana Shops Are Innovating To Fight Quick Commerce Giants

A few weeks ago, India's trade minister Piyush Goyal said the unbridled growth of e-commerce was a "matter of concern". Goyal’s worries may not be completely misplaced. Take for example the fact that kirana stores in India have faced a decline in sales thanks to the rise of quick commerce platforms like Blinkit, Zepto and Swiggy Instamart.

Bharat, who owns the Bharat Lakshmi store in Mumbai’s Malad, told The Core that the store has seen a 40-50% decline in sales due to quick commerce. He isn’t alone. But like Bharat, these mom-and-pop stores, which have been the mainstay of India for years, are also innovating to keep their regular customers.

From creating WhatsApp broadcast lists to hiring more help to deliver orders of even very little value, kirana shops are proactively finding ways to keep their customers and get more of them. After all, local kirana stores know their customers' needs like a Blinkit or Zepto never can.

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THE TAKE

23 IITs, 21 IIMs And 23 AIIMS: Is Replication Diluting Their Brand Value?

Here’s a quick quiz question: how many IITs are there in India and where are they? Chances are you would say Kharagpur, Kanpur, Delhi, Mumbai (Bombay) and maybe Chennai (Madras). That is five if you got them all. There are actually 23 IITs in India now. The first was set up in 1951 in Kharagpur and there was some gap between the first five and the sixth. There are also 25 IIITs or Indian Institute of Information Technologies, some well-known and some not. They’re often confused with IITs.

How many IIMs do you know of? Most would think of Ahmedabad, Calcutta (Kolkata), Bangalore and Kozhikode. There are currently 21 IIMs in India. And how many AIIMS do you think one can name? Most would think of AIIMS in Delhi. But there are 23, some of which are still under construction.

A promoter of a steel company in Maharashtra once told me industries in India can go to overcapacity very quickly, so much so that they become uneconomical and unviable. This includes television news. There are close to 390 news channels and it is a recurring mystery how they survive, even accounting for vanity capital.

It didn’t strike me until Shantanu Rooj of TeamLease Edtech pointed out that what we are seeing now is perhaps the early signs of overcapacity and brand dilution. This is not an argument against more medical, engineering or management seats but the clubbing of them under the IIT or IIM brands. Do you know how many B Schools there are in India? Depending on whom you ask, the answer can vary between 3,000 and 6,000.

A senior professor at an American Ivy League college once spoke to me about why they were not expanding into India. He explained at that time while they were exploring campuses in a few locations and would want to explain if Indian regulations permitted, they would always maintain them as satellites of the main institution. His point was that there could only be one Stanford, Harvard or Columbia.

Admittedly, the nature of education delivery has changed in recent years. The Ivy Leagues now have several layers of offerings, ranging from online and offline or hybrid executive programmes to entirely online programmes. I have often noted Harvard Business School certificates on the walls of office cabins I have visited. On closer inspection, they turn out to be advanced management programme certificates and not the full degree.

This deluge of options to get degrees has not diluted the core brand and proposition. Possibly because there is careful delineation of courses and offerings, even as more students are sought out. Or the original brand can withstand some dilution thanks to growth because it's been around for a few hundred years. Whatever the reason, it is clear that the institutions back in India seem to be seeing a dilution in their brand and standing be it the IITs, IIMs or AIIMs. However, the original few still stand out because of their strong faculty, research strength and body of work.

The way forward is to do a proper brand audit, including a performance audit, of these newly minted colleges both from a student and prospective employer point of view. It does not seem logical that institutions can be replicated at such a scale without compromising several factors. Institutes of learning are not assembly-line automobile factories which can be replicated and expanded with the push of a button.

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CO:RELATIONS

Sugar. Spice. And Everything Nice

Sugar company shares have outperformed the broader market in 2024. There is still some more steam left if an analysis by India Ratings, an affiliate of global ratings agency FITCH, is to be believed. Cash flows of sugar companies are all set to improve, with the government lifting restrictions on sugarcane used to make ethanol. The agency also believes that the government could hike ethanol prices as ethanol production costs have increased significantly. At the same time, the probability of producers using sugarcane to produce ethanol is likely higher than that of rice.

A lot depends on the ethanol blending rate too. It is the percentage of ethanol mixed with petrol. It will likely hit 14% in 2023-24 against 12.1% in the year-ago period. The government has set a target rate of 20% by 2026. However, India Ratings believes that even if the blending rate goes to 16-18%, that will ensure continued growth for ethanol companies.

FROM THE PERIPHERY

—✈️ Indian carriers boosted their international traffic share in Q1 2024-25, carrying 46% of incoming and 45.3% of outgoing passengers, a sharp rise of over 1000 basis points from pre-pandemic levels. This surge, driven by the government's cap on foreign airline bilateral flying rights, allowed IndiGo and Air India to grow their international operations by around 20%. Air India saw a 46% jump compared to pre-pandemic numbers, while IndiGo more than doubled. However, airlines like IndiGo and Akasa Air are urging the government to renegotiate for more slots, especially with the Middle East to enhance trade and connectivity.

—🛵 Electric vehicle startup Ather Energy has filed for an initial public offering (IPO), which will include a fresh issue of shares worth Rs 3100 crore. The electric two-wheeler manufacturer filed its draft red herring prospectus on Monday. The IPO includes investors and promoters selling 2.2 crore shares. Ather’s IPO announcement comes a month after its rival and market leader Ola Electric went public. The manufacturer plans to utilise funds raised from the IPO to establish a new electric two-wheeler manufacturing facility in Maharashtra.

—🔌 Electric vehicles will cost the same as petrol and diesel vehicles in the next two years, according to union transport minister Nitin Gadkari. He added that while subsidies to EV makers may be considered, they wouldn’t be needed much longer since costs of production are coming down. Battery costs, which make up a significant chunk of the price of an EV, have fallen sharply and are expected to fall further. Gadkari was speaking at the 64th ACMA annual session.

—🛍️ Ingka Centres, part of the Ingka Group that operates IKEA, will invest 607 million euros (Rs 5,500 crore) to establish its second 'Lykli' meeting place in Noida, raising its total investment in India to 1 billion euros. Despite delays, with Lykli Gurugram now opening in 2026, Noida will create 9,000 jobs and be Ingka's first global meeting place with a hotel. Expected to attract 25 million visitors, Lykli offers shopping, office space, and social activities, collaborating with local communities and over 3,000 global brands.