There are two significant ways for a retailer to deliver products to the market and consumers: offline, traditional brick-and-mortar stores and online retail sales. The Indian retail sector is a dynamic ecosystem, with modern formats and quick commerce now coexisting alongside nearly 15 million Kirana outlets that dot every corner of the country.

Over the last few years, the expansion of quick commerce has altered consumption habits in metros and tier-1 cities, offering speed and a wide selection. According to Red Seer, the quick commerce market grew nearly 77% year-on-year in 2023, driven largely by younger urban consumers. Yet, this growth is heavily concentrated in the top 10 cities. For the majority of India, particularly rural and semi-urban regions, Kirana stores remain the backbone of retail.

The Deloitte India Consumer Survey 2024 shows that 59% of consumers still prefer general and modern trade for food and beverage purchases. This resilience demonstrates that Kiranas are not only about convenience; they are also embedded in the social and economic networks of local communities. They often extend informal credit, ensure accessibility in rural and peri-urban areas, and provide stable self-employment to millions of families. For Indian households, Kirana shops continue to anchor the retail experience. Protecting and strengthening these outlets is not just about preserving tradition but about ensuring inclusive growth in a sector that employs millions directly and indirectly.

Beverages and kirana stores

One of the most ubiquitous products in local Kirana stores is beverages, particularly aerated drinks. These are high-velocity items with strong brand recall and serve as an entry point for daily footfall. They can be described as anchor goods: consumers often enter a store for a cold drink but leave with snacks, household essentials, or impulse buys. Affordable price points and an extensive supply chain allow Kiranas to leverage beverage sales to drive additional purchases.

While the beverage sector is often viewed primarily through the lens of large multinational brands, its significance to small retailers cannot be overstated. According to a study by the Confederation of All India Traders (CAIT) and Hansa Research, beverages contribute nearly 11% of the value and 30% of the sales volume in retail shops. It is often assumed that beverage companies enjoy disproportionately high margins. They offer retailers margins of 19–24%, significantly higher than the 8–17% margins typically observed in other FMCG categories. This ensures that small retailers not only sustain their business but also grow their income by stocking beverages as core products.

The beverage industry’s relationship with Kirana stores goes deeper than product placement, extending into infrastructure and operational assistance. Branded coolers, for example, have become an essential asset for small retailers, enabling them to stock not just beverages but also perishable goods such as dairy and packaged foods.

This expansion of offerings helps drive footfall and boosts overall sales, while simultaneously enhancing the shopping experience for consumers. Delivery partners and supply-chain workers engaged in replenishment also benefit from the steady demand that beverage distribution creates. For many shopkeepers, the presence of a branded cooler signals modernity and reliability, strengthening their standing within the local community. In subtle but important ways, such support elevates their socio-economic status while reinforcing their role in the neighbourhoods’ daily life.

The retail challenge

Beverages occupy a central position in India’s retail ecosystem that goes beyond their role as fast-moving consumer goods. Yet, the product category continues to be classified as “demerit goods” under the Goods and Services Tax (GST). Aerated drinks, for example, attract the highest GST slab of 28%, coupled with an additional 12% compensation cess. Such classification groups them with products like tobacco, which overlooks their retail and livelihood impact.

When we levy such taxes, we impact not only large businesses but also the entire retail ecosystem. Small retailers, distributors, and consumers all feel the consequences. High taxation often suppresses demand in price-sensitive rural and semi-urban markets, limiting the ability of Kiranas to maximize sales. At the same time, it discourages companies from extending deeper distribution networks into underserved geographies, thereby affecting the employment chain associated with retail, logistics, and last-mile delivery. Earlier in 2024, as well, discussions about a possible further GST hike on aerated drinks drew strong resistance from retailers and distributors. The All-India Consumer Products Distributors Federation (AICPDF), representing 1.3 crore Kirana outlets and 4.5 lakh distributors, warned that any increase would ripple across the country’s retail backbone—highlighting just how central these retailers are to India’s retail ecosystem.

As India revisits its tax slab structure, it is crucial to recognize the role of beverages in sustaining retail livelihoods. Treating them as if they were inherently harmful overlooks their contribution to local employment, household incomes, and the broader retail ecosystem. Supporting Kiranas, through thoughtful tax classification, supply chain incentives, and access to infrastructure, strengthens inclusive growth, ensuring that millions of small retailers and their families continue to thrive while keeping India’s retail ecosystem resilient.

The author is a Practitioner Development Economist and retd Sec GoI. Views are personal.