India’s FMCG market is surging, projected to become the world’s third-largest consumer market by 2030. But what’s at the heart of this boom? Kirana stores. These mom-and-pop shops, long considered the backbone of India’s retail ecosystem, are stepping up with agility and innovation to dominate this dynamic landscape. They’ve outpaced competitors by embracing digital payments, providing quick delivery, and maintaining personal connections with customers — all while catering to an evolving consumer base that’s increasingly digital-savvy and convenience-oriented.

Despite urban markets generating 65 percent of FMCG revenue, rural areas remain a focal point for the industry, says a recent report. Kirana stores play a crucial role here by servicing both urban and rural markets with unmatched reach. With over 13 million stores nationwide, the humble kirana holds an astounding 70-80 percent share of FMCG sales, outshining organized retail and e-commerce. They offer convenience, credit, and flexibility, bridging the gap for rural consumers and forming habits that persist even when customers migrate to urban areas. This is a long-term investment in customer loyalty that the modern trade simply can’t match.

The FMCG Market in 2024

India’s FMCG sector has surged post-pandemic, recording a 12.2 percent year-on-year growth in Q2 2023. Yet, behind this rapid growth lies an emerging divergence between affluent and unaffluent consumers. On the one hand, affluent consumers opt for larger, premium brands and multi-pack sizes. On the other, unaffluent consumers prefer economical, often unbranded products, yet still rely heavily on kirana stores. The agility of these stores has allowed them to adapt to the dual demands, stocking both affordable and premium products.

Traditional kiranas are also quick to adopt technological upgrades. With digital payments now a fixture, these stores seamlessly combine old-school personal service with new-age convenience, capturing a significant portion of India’s consumer base. And despite global challenges like rising commodity costs and unseasonal rainfall, which have led to price hikes, kiranas have maintained a steady footfall due to their affordable product lines and community connections.

In the 13th edition of FICCI MASSMERIZE 2024, Chirag Paswan, Minister of Food Processing Industries, emphasized that FMCG growth is crucial to achieving a "Viksit Bharat" (Developed India) by 2047. This sentiment is echoed in the government’s commitment to setting Indian standards in FMCG, which would enhance product quality and safety on a global scale. This focus on quality reinforces the reputation of Indian products worldwide, aligning well with the local, personalized service that kiranas provide.

Paswan further outlined plans to establish food testing labs and multi-purpose food irradiation units, initiatives aimed at minimizing food wastage and ensuring quality. Such governmental support provides a competitive edge to kirana stores as they offer certified, safe products to consumers, especially in rural areas where access to high-quality goods is still limited. The emphasis on standards will encourage more people to trust and rely on their local kirana, knowing that the products they buy are up to the mark.

Technology Transforms

One of the biggest shifts in India’s FMCG sector is the adoption of quick commerce and digital channels. Quick commerce, initially a pandemic-driven trend, has continued to thrive, growing by 230 percent between 2021 and 2023. This model has encouraged even small retailers like kiranas to adopt tech-driven strategies, making digital payments, home delivery, and online orders commonplace.

While modern trade and e-commerce have gained traction, kiranas offer something unique: trust. For consumers, particularly in rural areas, kiranas remain the go-to option. The integration of digital payments into these stores has been a game-changer, providing a seamless shopping experience that combines the ease of digital transactions with the familiarity of local service. 

Moreover, quick commerce has opened new doors for FMCG brands by creating an omnichannel approach where customers can order online and pick up at the local Kirana or get it delivered within minutes. With kiranas adapting to these changes, they’re not only maintaining but expanding their customer base. This blend of old and new is precisely what makes the Indian FMCG market so exciting.

Kiranas as ‘Mini Supermarkets’

The trend of consumers favoring larger pack sizes and premium goods isn’t limited to urban areas. Kiranas have transformed themselves into mini-supermarkets, offering everything from daily necessities to indulgent treats. For instance, chocolate sales have seen a 30 percent year-on-year jump, while soft drink sales have grown by 19 percent — trends that Kiranas are perfectly poised to tap into by stocking single-serving packs and affordable treats.

Households with incomes over $60K are also increasingly looking for promotional offers, something that kiranas excel at with local deals and personalized discounts for loyal customers. These flexible pricing tactics are a powerful tool, helping Kiranas retain price-sensitive customers while offering premium products for higher-income households.

Affluent vs. Unaffluent 

The disparity between affluent and unaffluent consumers is becoming more pronounced in the FMCG sector. Affluent households, cushioned by steady income growth, are gravitating towards premium brands and larger packs, while less affluent households are tightening their budgets and opting for more economical choices. Kiranas have astutely adapted to these shifts by diversifying their stock to cater to both ends of the economic spectrum, ensuring they remain relevant across all income levels.

In beauty and personal care, for instance, affluent consumers are splurging on premium brands, and kiranas are quick to respond, stocking products that cater to this demand. Meanwhile, they offer affordable alternatives to lower-income households, ensuring no customer segment is left out. This versatility underscores why kiranas remain unbeatable: they cater to both ends of the spectrum without compromising on personalized service.

E-Commerce vs. Kiranas

E-commerce has indeed risen as a powerful channel for FMCG sales, driven by convenience and variety. With internet penetration forecasted to reach 907 million users by 2023, online platforms now hold 17 percent of the FMCG market. While this growth is impressive, it doesn’t spell doom for kiranas. Instead, they have started collaborating with e-commerce giants to leverage digital platforms and reach more consumers.

This partnership between e-commerce and kiranas has been mutually beneficial, allowing them to tap into digital channels while e-commerce platforms gain access to the last-mile delivery network that kiranas provide. For consumers, this means they get the best of both worlds: the convenience of online shopping and the reliability of their neighborhood kirana.

Why Kiranas Will Keep Winning

The adaptability of kiranas is at the core of their continued relevance. As FMCG brands intensify their efforts in rural markets, they will serve as an invaluable distribution network, reaching the remotest parts of the country. With rising disposable incomes, improving infrastructure, and enhanced digital access, kiranas are expected to evolve further, integrating more technology to streamline operations and offer even better service.

Kirana stores are also primed to benefit from the government's focus on reducing food wastage and enhancing food processing. With the establishment of multi-purpose food irradiation units and food testing labs, they will be able to offer higher-quality products, aligning well with government standards and boosting consumer confidence.