Part 3 · FMCG trade practice · Chapter 3.3
Big brands and small brands
Draft: the wording may change.
The idea
A national brand sells itself: shoppers ask for it, so retailers order it. A regional brand has to be pushed: the stockist's salesman must ask the retailer to take it. Regional brands win by paying the trade more, fitting local taste and price, and being easier to deal with. A stockist should carry both — but count the effort each one takes.
Pull and push
Pull is when demand starts with the shopper. The national detergent brand advertises on TV every evening. A shopper walks into Ravi Stores and asks for it by name. Ravi Stores orders it whether or not the salesman says a word.
Push is when demand starts with the trade. A regional detergent from a factory near Coimbatore has no TV budget. The salesman must show it, explain the extra margin, maybe leave a few packets on trial. The retailer then recommends it to shoppers who are not fussy about the name.
Most stockists carry one or two pull brands to keep retailers coming, and a few push brands to earn better margin.
How the two compare
| National brand | Regional brand | |
|---|---|---|
| Who creates demand | Advertising (pull) | The trade (push) |
| Margin to stockist | Lower | Higher |
| Margin to retailer | Lower | Higher, plus free goods |
| Rotation | Fast | Slower |
| Payment to company | Often advance or very short credit | Often 15–30 days' credit |
| Schemes | Many, with strict rules and paperwork | Fewer, simpler, sometimes on a phone call |
| Claim settlement | Process-driven; slow if papers are wrong | Faster if the owner trusts you; slower if the company is short of cash |
| Risk | Low; the brand will be there next year | Higher; the company may stop supplying or change stockists |
The figures vary by company. Ask for them in writing (chapter 3.5).
How regional brands compete
- Price points. A ₹5 pack, or a ₹10 pack with more grams than the national brand's ₹10 pack.
- Local taste. A pickle, a masala, a snack made the way the district likes it.
- Trade margin. More paise per packet to the retailer, so he recommends it.
- Flexibility. The owner may take a call on a return or a price change in one day. A national brand needs approval from the region.
- Focus. A small company may have only a few stockists in the state and listen to each of them.
At the counter
A stockist compares one month of the two detergents (sales before GST):
| National detergent | Regional detergent | |
|---|---|---|
| Sales | ₹6,00,000 | ₹1,50,000 |
| Margin | 3.5% = ₹21,000 | 8% = ₹12,000 |
| Stock days | 10 | 35 |
| Money in stock (at cost) | ₹1,93,000 | ₹1,61,000 |
| Salesman time | Little; it sells itself | One day a week, pushing it |
| Claims pending with the company | ₹4,000 | ₹18,000 |
The regional brand looks better on margin. But it ties up almost as much money in stock for half the margin rupees, eats salesman time, and ₹18,000 of his money is waiting with the company. The national brand earns more on the money invested. The regional brand is still worth keeping if the salesman's extra day also sells other brands on the same beat — but only if the claims come back.
Common mistake
Taking on a regional brand that competes head-on with your national brand in the same category. The national company's sales officer will see it in your godown, and your agreement may not allow it (chapter 3.5). Even where it is allowed, your own salesman ends up selling against himself. Choose regional brands that fill gaps — a category or a price point your national brands do not cover.
Where you'll use this
Chapter 3.5 shows how to check a company's offer before signing. Chapter 3.17 shows how a stockist with many brands keeps a separate profit and loss for each. In Part 4, brand-wise reports of margin, stock days and pending claims make this comparison every month without a notebook.
Check yourself
- What is the difference between pull and push?
- Give three ways a regional brand competes with a national one.
- In the table above, why is the regional detergent's higher margin not the whole story?
Answers
- Pull: shoppers ask for the brand, so retailers order it. Push: the trade must persuade retailers to stock it.
- Any three of: price points, local taste, higher trade margin, flexibility, focus on each stockist.
- It earns fewer rupees, sits longer in stock, takes salesman time and has more money stuck in pending claims.