Britannia has trialled a 15-day exclusive launch of its Good Day Chunkie cookie range on Amazon India

Britannia has trialled a 15-day exclusive launch of its Good Day Chunkie cookie range on Amazon India

Britannia Industries last week claimed to be the first biscuit company in India to launch an online-exclusive product before it hit retail stores. With India's e-commerce market predicted to be worth US$70bn by 2020, none can fault Britannia for testing the online waters. It's also a great PR move. But there are some dangers the food industry might want to consider before it jumps online. Hannah Abdulla explores.

Digital - it's a whole new world presenting an array of opportunities. Nowhere more so than in India. Sachin Bansal, co-founder and CEO of local e-commerce company Flipkart, has said the online sales in the country are expected to hit US$70bn by 2020. In 2013 it was valued at $13bn. It's no surprise then the FMCG sector wants a slice of the action. At the end of last week, Britannia Industries became what it claimed was the first biscuit company in the country to launch a product online before it hits retail stores.

The firm embarked on a 15-day trial of its Good Day Chunkies chocolate chip cookies, before the product would be taken offline and sold via traditional retail channels. It's the first move of its kind for the firm and marketing director Ali Harris Shere was quoted in local press as saying: "Digital is emerging as a big platform and we want to be the first one to explore it, rather than being a follower."

But how much of a threat is this move to competitors like Mondelez International and Parle Products?

Online is important, concedes Kaushika Madhavan, a partner at AT Kearney India, but only to an extent. In the US during 2013, only 10% of purchases were made online, compared to physical stores, which took the lion's share of sales at 90%. Madhavan says India is unlikely to be any different, adding online retailing is not here to replace stores, nor will it - anytime soon.

Online appears to be used as an attention-seeking tool in India, rather than strictly another channel to make a buck. At the end of September, Coca-Cola launched Coke-Zero exclusively on Amazon.in for two weeks before it hit traditional shelves. In 13 days, 100,000 cans had been sold.

These promotions or "big sale days", are attracting a lot of consumer attention, says Madhavan.

"If you take a product and do an exclusive online launch, you are getting a headstart in grabbing potential consumer attention. It gives you a headstart in promoting the product, and you hit a lot more eyeballs than you might through the traditional advertising route - before any money is spent," he adds.

Arvind Singhal, chairman at management consultants Technopak, agrees a lot of the exclusive deals in colas, burgers and biscuits are "largely marketing initiatives, which helps in creating the necessary buzz around the brand".

What has been questioned is the actual benefit of online as a sales tool, particularly for the FMCG industry. 

In India, online does have a respectable reach. According to a report in August by local chambers of commerce Assocham and US internet analytics firm comScore, the retail category penetration in 2013 increased to 65%. But when it comes to online grocery shopping, AT Kearney's Connected Consumers are not Created Equal: A Global Perspective survey, revealed only half of its respondents said they would made a grocery purchase online in the last three months.

"Online as a medium works well for those products where there is a high level of involvement and interest, like mobile phones or books. When it comes to staples, the involvement of consumers is not too high," Singhal says.

And for manufacturers too the recompense of selling single food items is not too appealing.

"For an FMCG firm, delivering single packs of food is a very unprofitable proposition on a sustained basis," says Madhavan. "When you consider a single food item at US$1.50, the cost of delivery is already higher."

Could delivery itself, a function not too established in India as a result of weak infrastructure, be another reason FMCG firms are put off taking their products online?

Not really, asserts Madhavan. "It's not as if brick and mortar retailers are not delivering to consumers - they've adapted to the lack of infrastructure." Online retailers are also adapting as they innovate to "create delivery models unique to India and adapt to working with poorer infrastructure," he explains.

Instead, Madhavan questions how financially sustainable a strategy of running online promotions will be for manufacturers. 

"Right now they [manufacturers] are capturing market share [online]. A lot of their customers are coming from the fantastic deals and promotions they offer. But how sustainable is that? Over time they're not going to be able to offer as many deals as they are today. It will be interesting to see how consumers react when the deals slow or stop. Will they [customers] return to traditional stores?" Madhavan says.

Online serves its purpose of course. Bricks and mortar stores have a limit as to how many products they can offer. There'll be that very tiny segment of consumers who want an item it does not make sense for the stores to stock and online can help with that. At present, in India, online has the upper hand when it comes to offering these unique products.

While Britannia may well be the pioneer in introducing an online-only option to buy its biscuits - a great move in getting the product into the public eye and talked up before it hits retail shelves - the move is not viewed as hugely important in the grand scheme of things. In fact, it is unlikely we are going to see competitors scrambling to get their products online, purely because long term, offering a single pack of biscuits, for GBP1.57 with free delivery, is going to harm margins.

"I think solutions will be found," says Madhavan hopefully. "But firms will have to work out either how to retain customers while offering lesser discounts, or how to deliver, without incurring huge costs."