I read with a lot of interest the series of recent articles carried in Economic Times on the ongoing and perpetual battle between the brands at one end and the modern retailers on the other. It started a few days back with the news that Reckitt was keen on reduction of margins for the modern retail outlets (by about 2% or so).
What made it particularly interesting for me was that about 2 years back (thats when modern trade was really modern in India), I had a longish meeting with the then brand custodian of one of the Reckitt brands who was spending majority of her marketing funds on "creating"a category for her product at the modern trade. We discussed issues around eventual private labeling, shrinking margins, cost charged towards display, lack of traditional trade focus etc. however, perceived higher and better quality of consumer engagement ensured that she stuck to her decision of pouring very serious monies in modern trade to create a category - irony was that the largest amount was on the Future Group.
While modern trade currently represents only 5% of the FMCG trade in India, the writing on the wall is very clear - the FMCG brands will need to take a good hard look at their own shopper marketing strategies and step back to embrace the traditional grocer / kirana store.
If the brands don't - they will be constantly on the receiving end - today Reckitt got taken off the shelves, yesterday it was Frito-Lay and Kellogg's. Tomorrow who knows.