Hindustan Unilever, GlaxoSmithkline Consumer Healthcare [Get Quote], Godrej Consumer Products [Get Quote], Dabur [Get Quote], Nestle [Get Quote] and other FMCG companies are lining up initiatives to maximise returns from modern trade channels including hypermarkets and supermarkets. From in-store promotion and special retail packages to spinning off specialised teams for modern trade, FMCG companies are leaving no stone unturned.

Sales from MTC formats account for over 30 per cent of revenue for the retail players, and have started to contribute larger volumes for FMCG players.

FMCG companies find it easier to manage sales at the point-of-purchase because of effective inventory management systems that characterise the modern format. "It is easier for a company to introduce a new product through a large retail chain having national presence. It can give the initial visibility support that can translate into sales," says Purunendu Kumar, associate vice-president (retail and consumer goods), Technopak KSAKumar.

"The other advantage is - for companies, it is easier to push premium products through modern retail as against the regular kirana store," he said.

In a fragmented retail environment as in India, it is important for FMCG companies to focus on point-of-purchase and get consumer insights to evolve a retail approach, says Kumar.

"Modern retail format allows that space for on-ground promotion and other initiatives, which help in consumer connect. Further, it allows the company to collect consumer insights and data to measure its success," he adds.

GlaxoSmithkline Consumer Healthcare, for instance, has hired an international firm -Glendinning Management Consultants - to advise on its modern trade arena, apart from spinning off a separate division to work only on this sales route.

"By 2010, we expect sales through modern trade to contribute around 10 per cent to our turnover, therefore it is a very important channel for us. It also helps us reach out to our target audience in a unique manner and create a relationship with the brand," says Aditya Kapoor, general manager, modern trade and CSD, GSKCH.

At present, modern retail initiative contributes about 4.5 per cent to its overall sales. The company conducted a customer preference study as part of its strategy to strengthen sales in the organised retail channel and is enhancing its customer-centric capabilities such as supply chain management, in-store execution, category expertise, and joint business planning.

Modern trade also allows more space and provides an established route to launch new products. "We recorded 50-70 per cent more sales in the controlled modern trade unit, compared to a regular retail unit when we launched Ezee-Bright & Soft this year," says V Suresh, vice-president, marketing, GCPL.

The company undertook consumer awareness initiatives for on-ground activation of the brand leading to better visibility and sales. Nestle has created a new division this year for channel sales development for better modern retail sales execution.

Similarly, Dabur initiated a programme christened DARE (Driving Achievement of Retail Excellence) to improve its effectiveness in organised retail. For many players, modern retail offers better shelf-space and visibility, whereby they can introduce more economical packs and the right stock-keeping-unit strategies.

Ranju Kumar Mohan, vice-president, sales & marketing, Henkel India [Get Quote], says, "The consumer who enters a modern retail store is more exposed to the choice of products. Thus, he can make a choice of buying a bigger pack that lasts a month in place of a smaller one that he would pick on other days."

Modern trade accounts for about 5-10 per cent of urban sales for FMCG companies and this can go up to 25 per cent for southern markets, where the channel has a stronger presence.

The industry expects contribution from modern trade to double in the coming few years.