Key Trends That Will Shape The Consumer Goods Sector
As FMCG firms emerge from pandemic-induced disruptions, here are trends that would influence it.
Consumer goods makers aren't too concerned about the impact of a possible third wave as businesses have now largely stabilised and become immune to Covid 19-like disruptions.
The supply-chain management has changed dramatically in the last one year, making the entire system smooth and transparent, Ullas Kamath, joint managing director at Jyothy Laboratories Ltd., said at an event by industry lobby Ficci.
“Closing stocks are down and consumers are getting fresher products than before. A probable third Covid wave will not be as severe as the first or the second one, and its impact on businesses and operations will be much lesser,” Kamath said. “We aren’t really concerned about it.”
The fast-moving consumer goods industry has identified five major trends—evolved trade channels, sustainable initiatives to conduct business responsibly, enabling kirana or mom-and-pop stores, leveraging innovation in technology and a hybrid workplace model.
Businesses have started bringing in alternative workforce models and leveraging the gig economy, said Saugata Gupta, managing director and chief executive officer at Marico Ltd. “The idea of a hybrid workplace (physical and remote) is gaining traction and we will kick-start it starting Oct. 1.”
Emerging distribution models like business-to-business, direct-to-consumer and social commerce are likely to disrupt traditional channels, according to Kamath and Gupta. But general trade, modern trade, and e-commerce will continue to co-exist, they said.
B2B companies are competing with distributors to reach kiranas. “Using eB2B, companies connect with manufacturers directly and procure products with the aim of managing inventory more efficiently,” said a report by Deloitte Touche Tohmatsu India and Ficci released at the event. “These firms also have access to a broader category of products to offer to kiranas in urban and rural markets.”
Online shopping also saw a significant growth towards the later stages of the pandemic, driven by frequent lockdowns, movement curbs, consumption among millennials, and preference for premium products among higher-income groups, the report said.
Faster delivery and multiple modes of payment have also fuelled the exponential growth of e-commerce. “Riding on this online shopping trend, major FMCG companies built their online presence through platforms and their D2C websites,” the report said.
Another trend is instant gratification. Consumers want goods and services at the click of a mouse. In the past, 24-hour delivery was a breakthrough. According to Arvind Mediratta, managing director and chief executive officer at Metro Cash & Carry India Pvt., retailers are expected to benefit from reduced delivery time.
General Trade To Remain Dominant
The Indian retail industry is one of the fastest growing in the world and is projected to reach $1.3 trillion by FY24, according to Forrester Research.
“Whether you're a traditional retailer or a brick-and-mortar retailer or e-commerce, you will play well if you are resilient and continue to stay relevant with the right proposition,” said Mediratta. The e-commerce market is expected to overtake modern trade by FY26 but traditional trade will continue to stay relevant for a long time, he said.
"The share of e-commerce is expected to grow from 6% of the total market in FY21 to almost 11% by FY26. The share for modern retail, which has seen some headwinds, will probably remain static,” Mediratta said. “The traditional trade continues to do very well. They have been extremely resilient during the crisis and have gained market share from 87.1% to 88.8% of the market.”
Kiranas or traditional mom-and-pop stores play a significant role in the Indian retail sector and contribute almost 80% to the total retail and 11% to the GDP. They saw a strong rebound during the pandemic as most kiranas selling essentials were allowed to operate throughout the lockdowns.
According to the Deloitte-Ficci report, digitisation is enabling kiranas and opening new growth opportunities for the FMCG sector.
“Kirana store owners need to collaborate with logistics companies to solve last-mile delivery challenges. Large companies can strengthen their hyperlocal strategy through partnering with kiranas and using existing retail space as a warehouse to supply to local kiranas,” the report stated. “FMCG companies will need to reimagine their retail ecosystem, while continuing to partner with kiranas to leverage their strong connections and trust with end-consumers.”