News: Will Pantaloon bring big business to its knees?
(TV18 22/04/2006) Mumbai - There is a battle for power brewing between modern retail chains and fast moving consumer goods, FMCG companies. Pantaloon has fired the first salvo and is demanding higher margins from top FMCG companies. It's even threatened to take some brands off its shelves, if demands are not met.
As retail evolves, the Indian retailer is flexing his muscles and how. A case in point is Pantaloon Retail, which has written to nearly 20 leading FMCG companies like HLL, P&G and Marico for an additional 5% margin in certain product categories like personal care. Retailers normally earn margins of between 8 and 15%.
The letter also highlights the high-points of modern trade, which is greater consumption, a better shopping experience and better profitability, by selling larger pack sizes and premium brands.
Managing Director, Pantaloon Retail, Kishore Biyani told CNBC-TV18, "I deserve it, as my cost of operations has gone up." But Executive Director, Marketing, Pepsi Foods, Punita Lal says that modern trade is important, but traditional trade continues to be the most important channel for them.
In its letter, Pantaloon has hinted at taking some brands off its shelves if FMCG companies fail to give them more margins.
When contacted, most of the FMCG companies chose to stay mum on the issue. Off-the-record though, some senior officials admitted that margin negotiation with modern trade is an ongoing issue. They felt that Pantaloon is trying to do a Walmart, ie. use its big volumes to demand higher margins. But in reality, none of the modern retailers is in a position yet, to hold manufacturers to ransom.
As retail evolves, the Indian retailer is flexing his muscles and how. A case in point is Pantaloon Retail, which has written to nearly 20 leading FMCG companies like HLL, P&G and Marico for an additional 5% margin in certain product categories like personal care. Retailers normally earn margins of between 8 and 15%.
The letter also highlights the high-points of modern trade, which is greater consumption, a better shopping experience and better profitability, by selling larger pack sizes and premium brands.
Managing Director, Pantaloon Retail, Kishore Biyani told CNBC-TV18, "I deserve it, as my cost of operations has gone up." But Executive Director, Marketing, Pepsi Foods, Punita Lal says that modern trade is important, but traditional trade continues to be the most important channel for them.
In its letter, Pantaloon has hinted at taking some brands off its shelves if FMCG companies fail to give them more margins.
When contacted, most of the FMCG companies chose to stay mum on the issue. Off-the-record though, some senior officials admitted that margin negotiation with modern trade is an ongoing issue. They felt that Pantaloon is trying to do a Walmart, ie. use its big volumes to demand higher margins. But in reality, none of the modern retailers is in a position yet, to hold manufacturers to ransom.
posted by InCar Group Press Room at 22:30
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