The manufacturer brands were working in a context where the media was consolidated, while the channels of distribution were fragmented. There were one, two, maximum three channels on which you could advertise and thereby reach 90 percent of the population. And the distribution channels were very fragmented, populated by mom and pop stores, which had little choice but to follow the often coercive mandates of brand owners. It was, therefore, not surprising that manufacturer brands ascended and became very powerful.

Somewhere in the early 1980s, the table began to turn. It was an evolution that started in the 1960s, but I like to take the year 2000 as a nice cut-off, when retailers became established and powerful.

We are now firmly in the century of modern retail. What has happened is that distribution channels have consolidated while the media has fragmented. Today, no more can brand manufacturers count on consolidated media to efficiently put their message in one place and have it reach everybody. When it comes to powerful retailers, it’s now clear that manufacturers are unable to capture all the negotiating gains.

Fast growing retailers like Amazon, BestBuy, Costco, Lidl, Save-A-Lot, and Wal-Mart are often seen by manufacturer brands as destroying value because these retailers sell manufacturer branded products at very cheap prices. This generates channel conflict for manufacturers vs their traditional, and often, inefficient channels. But these retailers are growing precisely for this reason. They are extremely efficient in getting branded products from manufacturers to end consumers.

Lower distribution cost means they are taking the brands to the customer at a cheaper price, and thereby, expanding the market. Brands must follow and distribute their products where consumers want to shop or they will be stuck in dying channels. As Sara Lee CEO Brenda Barnes puts it: “where the customer buys our type of product, we should be there.” And Sara Lee today sells pies at Save-A-Lot.

As I said earlier, lower prices means consumers save money and get better services, including lesser stock outs.

As I said earlier, lower prices means consumers save money and get better services, including lesser stock outs. With just two-three percent of overall share, organised retailing is at a nascent stage in India, but is poised to take a big leap. Against this background, how do you see the domestic retailing industry? What challenges and opportunities will it offer to marketers?

As retailers consolidate, the share of a brand manufacturer’s sales that flow through their largest retail accounts will grow, as it has done on a global basis. For example, the top 10 global retailers now typically account for 30-45 percent of a consumer packaged goods company’s worldwide sales, a number that manufacturers rarely like to divulge because it reveals their vulnerability. However, during 2003, Dial reported that the top ten retail customers accounted for as much as 57 percent of its sales!

Brand manufacturers must learn to partner effectively with these large retailers and move their relationships with them from adversarial to collaborative.

Large retailers will launch active private label or retailer brand programs. Many FMCG executives will have trouble accepting the new reality of private labels. Many of these executives must have started their careers when the retailers were unsophisticated, peddling unbranded generics, local rather than global in scope. As a result, those running large manufacturer brands, with MBAs from prestigious business schools, will continue with an arrogant attitude towards retailers. Most of them will find it hard to consider retailers, or executives who populate them, as their intellectual or social equals.

And certainly, manufacturers will have trouble accepting private labels as worthy competitors to their cherished brands. The only thing that we know for certain is that private labels will have a 40 percent share. So, the question is not if, but when.

E-commerce will be important in some categories like books, music, and travel. In the consumer non-durbales space, it will stay a non-issue as a very small percentage.

Markets change faster than marketing. How do you change to the channels of the future while maintaining the channels of today? History suggests that companies tend to stick too long to declining distribution channels. The advantage of this context goes to new players who get on to the fast emerging new opportunities.