No consumer goods at Paan shops: Biscuit, beverage, FMCG cos to bear brunt

These categories typically derive 10-30% sales from paan-plus shops; asking the shops to stop stocking these products could hit the segments hard

The directive of the Health Ministry asking paan-plus stores to desist from stocking non-tobacco products will hit categories such as confectionery, snacks and mosquito coils hard.

Typically, these segments derive between 10 and 30 per cent of their sales from these outlets, pushing them to seek alternative channels, experts tracking the market said.

"I am not sure how the small traders' bodies will react to this directive," says A Mahendran, chairman & managing director, Global Consumer Products, an FMCG start-up. "In recent years, these paan-plus stores have become important points of convenience for a number of consumers. An impact is bound to be there."

Typically, paan shops constitute around 25 per cent of the nearly 10-million FMCG retail universe in India. Most of these shops stock everything from toffees to biscuits, snacks, confectionery, beverages, mosquito coils, incense sticks, shampoo sachets and even hair oils.

The view of the Health Ministry is that children and even adults, who are non-smokers, should be prevented from being exposed to tobacco-related products such as pan masala, cigarettes and bidis when buying non-tobacco products from these stores.  

The directive aimed at chief secretaries of various states says that effective regulation of tobacco products is possible if a framework is put in place preventing the sale of non-tobacco products at these outlets.  

"While the intention is noble, how this will be enforced is something that most companies would be keenly tracking," says Mayank Shah, category head for biscuits and chocolates at Parle Products, says.

Analysts estimate that a cross-spectrum of companies from ITC to Britannia, Parle Products, Perfetti Van Melle, DS Group, PepsiCo, Haldiram's as well as mosquito coil and agarbatti makers could be hit due to this move.

Confectionery makers, in particular, are expected to be the be hit the most since almost 25-30 per cent of their sales come from paan-plus stores. "Not only is a paan-plus shop convenient for a confectionery maker, but toffees, sweets etc act as exchange settlement in the absence of coins," Mahendran, who understands the confectionery category well, said.

Experts say that these companies may now shift their attention to small kirana shops and outlets to push sales.