60% FMCG Companies Say Quick, E-Commerce Crucial To Boost Sales: NielsenIQ

At least 60% of fast-moving consumer goods companies have identified e-commerce as they their "most critical" sales platform, as per a latest study by NielsenIQ.

This trend is particularly prominent among medium-sized companies, where 67% favour online as their top sales channel. Small businesses follow, with 51% recognising online sales as their main revenue source.

Interestingly, the study reveals that manufacturers are achieving 1.5 times higher growth in e-commerce compared to category averages in noodles, refined oil, biscuits, coffee, and packaged atta.

"Traditional trade remains highly relevant for consumers, while e-commerce is increasingly gaining prominence in metro areas, driven by its convenience and diverse product offerings," said Pallavi Suresh, executive director — emerging brands, NIQ India. "Indian businesses are recognising the growing importance of digital as a significant operational channel and are now crafting targeted strategies to win in this space. Consumers are embracing the unique benefits of e-commerce, driving increased traction for brands from emerging manufacturers across key FMCG categories."

Quick commerce is projected to be just under $7 billion in size for 2024. But a Morgan Stanley report estimated a bear and bull case for the quick commerce market at $25 billion and $55 billion, respectively, by 2030.

Companies such as Hindustan Unilever Ltd., Godrej Consumer Products Ltd., Dabur India Ltd., Nestle India Ltd., Colgate-Palmolive (India) Ltd., Marico Ltd. and Adani Wilmar Ltd. have been rapidly growing their share of online sales to make quick bucks. They derive higher margins from increased sales of premium products, reduced distribution costs, and shorter credit periods in quick commerce as aggregators want to work with fewer players given limited space in dark stores. This has prompted FMCG manufacturers to bypass traditional distributors and sell directly to quick-commerce firms.

For Colgate-Palmolive India, e-commerce led by quick commerce is growing eight times faster than core, according to its managing director Prabha Narasimhan, who shared these insights with analysts recently. "The channel is driving significant growth, improving margins, and increasing market share."

Dabur has begun direct supplies to the warehouses of Swiggy Instamart, Blinkit, and Zepto. Additionally, the company is experimenting with quick commerce firms to directly connect its warehouses to their dark stores.

"We are continuously growing shares in quick commerce and e-commerce portals, be it marketplaces like Amazon, Flipkart or be it quick commerce channels like Swiggy Instamart, Blinkit and Zepto," Dabur India CEO Mohit Malhotra said. "Our growth is higher than their FMCG growth. So, if they have grown 50%, we've grown 70% with them on their verticals."

While traditional distributors are up in arms against quick and e-commerce players, Malhotra says, "You can't help it". "So, you have to bypass the stockist and go to them [online players] because their terms of trade and their want of products is such which only company themselves can fulfil."

Dark store keeps an inventory of not more than three days, which distributors cannot fill in, he said. "It's not possible for them to supply the entire assortment, which may be required by quick commerce players."

The NielsenIQ report further noted that convenience stores have seen higher penetration in India at 48%, compared to the global average of 18%, with large companies leveraging this channel the most (58%) followed by the medium-sized (54%). So far in 2024, the fastest-growing categories on online platforms are ready-to-eat products with a 52% increase, salty snacks and refined edible oils, with both growing by 41%, biscuits witnessing a 40% rise, and packaged atta growing by 39%, the report said.