Khushi Ram Paan Bhandaar, a cigarette and paan shop in Dehradun’s Chakrata Road, doubles up as a mini kirana shop. Starting in the early 1970s, the shop evolved from selling only paan and tobacco products to several more categories of consumer products today.
“It is essentially a paan shop, but in addition to selling cigarettes, paan masala and gutka, it also stocks mouth fresheners, confectioneries, biscuits, snacks, soft drinks, shampoos, soaps, skin creams, hair oil, stationary, detergents, toothpastes and other daily-need consumer products,” said Amitabh Talwar, a lecturer living in Dehradun’s Panditwadi area.
In India’s multi-layered retail sector, over 1.5 crore – and growing – paan and cigarette shops (known in the trade circles as the Paan Plus channel) are emerging as a valued distribution route for the makers of fast moving consumer goods (FMCG).
According to Nielsen, the Paan Plus channel, which currently contributes about 6% to the total $13.1 billion (Rs 71,198 crore) FMCG market, is growing at 19-21% (2012 over 2011). In value terms, the channel contributes the same numbers as the sales contribution by modern retail in India.
“The Paan Plus channel is much more widespread than the kirana stores. The shops may be much smaller in size, but the total channel adds up to huge numbers,” said Abneesh Roy, associate director, institutional equities research, Edelweiss.
Based on consumer buying patterns, the channel does best with products that are in the impulse category. While cigarettes and gutka form the major pull, the other major categories available at these outlets include confectionery, soft drinks, snack foods (notably chips), toothpastes, shampoos, soaps, face creams and batteries.
The channel is helping companies such as Cadbury, Hindustan Unilever, Perfetti, Parle Products, Britannia, PepsiCo, Coca-Cola, Procter & Gamble, Dabur and many more boost sales by a significant 10% year-on-year.
“The volumes sold through this channel are so high that companies are developing strategies focused on driving sales through them,” said Sunil Taldar, director, sales and international business, Cadbury India. “The Paan Plus channel has significant potential to aid the growth of our confectionary segment – especially for products priced below Rs 5. Sales of biscuits too can be heavily driven through this channel – Oreo, priced at Rs 4-5, is mostly sold through the Paan Plus retail environment.”
“Each Paan Plus store is very small and average sales are much smaller than other channel types including grocers, chemists and modern trade. What it lacks in individual sales, however, the channel makes up in its sheer numbers across India,” said Vijay Udasi, executive director, Nielsen India.
“The price points that do well are ‘affordable’ at Rs 2, Rs 5 and Rs 10,” said Rahul Shankar, sales head, CavinKare. Since consumers visiting these shops enjoy limited affordability, the price points need to be on the lower side. While it varies by categories, products in the price range of up to Rs 30-40 are mostly well accepted. However, companies are now looking to penetrate the channel with products at higher prices, effectively converting the shops to mini-kiranas.
“At Cavinkare, we supply to Paan Plus through a separate hawker distribution channel altogether,” said Shankar. “We cater to approximately 15,000 such shops, and mostly sell small packs of Spinz Talc, Chik Shampoo, Fairever, Chinni pickles and chikki bars through these outlets. The key advantages for this channel are convenient locations, and the ability to serve the lower income shoppers who prefer to buy daily.”