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Consumer Behavior Insights: Unlocking the India FMCG Market in 2023

animeshbajpai — Tue, 23 May 2023 13:46:45 +0000

Consumer Behavior Insights: Unlocking the India FMCG Market in 2023

by Akshay D'Souza

May 23 | 08 min read

India FMCG Market – 2022 Replay

A nation where FMCG products are sold from malls to makeshift stores or even motorcycles, the India FMCG market is one of the oldest industries that exists in the country. Local stores or Kiranas as they are called, have been carrying out unorganized retail for decades. But Covid altered how FMCG in India operates.

In a country where one can find a grocery store in every 2-mile radius, every shop went completely remote. Shoppers were only allowed on the streets for 4 – 7 hours. FMCG Salesmen didn’t set foot in their territories, but rather started taking orders remotely. Even the neighborhood retailers decided to embrace selling through digital mediums. The consumer on the other hand, went home, literally. Masses of youth left the urban India and travelled home, and then travelled more with the new code of WFH.

Two years zapped by, and right when 2022 began and the world re-opened with General Trade (GT) and Modern Trade (MT) starting to breathe back, another global crisis shook the Earth. Oil, a core ingredient of many FMCG products, faced a global scarcity as Russian troops invaded Ukraine, skyrocketing the prices of oil across all international markets. Soon, Shrinkflation and Price Rise became the strategic armors for FMCG companies in India to stay afloat. Consumers also replied with a bigger cry, with more than 1.5 lakh employees losing their jobs in India. And Covid’s sibling Omicron paid a visit, pushing down demand further below.

In a nutshell, FMCG in India had a challenging year in 2022 with companies going a full circle while starting the year with price-led growth to now bringing the focus back to consumption led growth.

As a result, the India FMCG market witnessed only 7.4+ YoY growth.

Even though global challenges affected prices and food inflation stood extremely high worldwide, India’s agri-economy provided us with some cushion to manage demand resulting in increased supply of essential food items in the local market, like rice & wheat, to manage prices.

Beverages products flew off the shelves in the scorching hot weather across the country, with over half the year’s sales coming in the four months of Summer.

Branded commodity products saw steady demand throughout the year, except in the second quarter of the year, when inflation forced people to postpone purchases.

While inflation did affect prices of many FMCG products like soaps, detergent etc, it led to a drop in size of purchases, and eventually a revision in prices as consumer brands in the Home and personal care space looked to improve consumption.

FMCG brands in the Home Care and Personal Care sector saw demand falling significantly. And with the surging inflation dominating most of 2022, many FMCG companies were forced to tune up prices to match raw material costs. This has been a leading cause for demand spiraling down.

From an economic standpoint, India became the fifth-largest economy and the most populated country in the world, and the country’s Unified Payments Interface (UPI) recorded a 91.11% YoY increase in the total number of transactions (74.83% in terms of value).

Now today in 2023, we stand unmasked (literally), looking at the edge of a resilient Indian FMCG market that has been battling evils like Covid, Inflation and Unemployment, but is yet going strong with the help of innovation and intelligence.

But what’s changing in the FMCG Market in India in 2023?
Is the worst of Inflation behind us?
What new constraints and opportunities awaits in the market?

Lets deep dive.

India FMCG Market in 2023 - The Endemic edition

In 2023, FMCG in India is more prepared with a robust, transformed distribution network that is ensuring product availability not matter the adds in order to meet consumer needs.

According to Manish Bandlish, MD of Mother Dairy Fruits & Vegetables Ltd, digitization will be a driving force for growth and development in the FMCG sector in 2023.

A rapid turn towards rural penetration has become evident among other major market players in the FMCG market. The biggest beverage manufacturer Coca-Cola has announced that it’s looking to intensify distribution in rural FMCG market in India through general trade channels. Emami, one of India’s leading product maker also plans to reach the goal of 60,000 tier-3 towns in order to double its rural coverage.

Other leading businesses like Nestle India has also been working towards taking its range of FMCG products to ~1.2 lakh Indian villages by 2023, while TCPL (Tata Consumers Products Ltd) is exploring to increase the number of wholesalers and increase rural market share. Even India’s biggest FMCG company, Dabur is investing in nearly 9000 villages in the second quarter of 2022-23 to boost coverage to over one lakh Indian villages.

By 2025, the FMCG market in India is expected to increase at a CAGR of 14.9% to reach US$ 220 billion by 2025, from US$ 110 billion in 2020.

In the following section, we do an India FMCG sector analysis of 2022, to project how each segment can perform in the coming months of 2023.

India FMCG Sector Analysis & 2023 Forecast

1. Beverages

The rising heat that led to 23.1% YoY of the Beverages category is expected to soar sales in 2023 too. Additionally, Out-of-Home consumption will grow in full swing, with hybrid work becoming the new normal and the HORECA industry eagerly waiting to gain back the lost traction.

However, with the growing consumerism towards healthy eating and the high penetration of online channels providing marginal discounts and free home delivery, can prove to be a reason for caution for many brands.

2. Commodities

General staples such as atta, maida, rice and edible oils have seen a recovery in terms of volume in the first quarter of 2023 which makes us optimistic that this category might grow beyond last year’s 8.9% growth rate. With the prices of commercial gas cylinder coming down significantly, restaurants and shacks are likely to cook more to increase profits and lower costs.

A higher cultivation of wheat, rice and mustard sold at higher market prices, is also likely to place more cash in the hands of farmers, boosting rural spending towards commodities.

3. Personal Care

To boost and bring back the performance of the Personal Care FMCG sector to green from the -5.0% in 2022, product innovation needs to be at the forefront.

Product innovation is expected to be a crucial part of 2023 strategies for leading market players in this category, as they strive to complete with new and contemporary products catering to more specific consumer needs. To beat the eCommerce scare, rural penetration can prove to be highly beneficial for brands offering pocket-friendly products.

4. Home Care

After two years of amplified growth, this category might continue to see lowering demand, like last year’s -8.1% growth. Having spent abundantly on this category since 2020, consumers are now looking for value purchases that can meet their basic daily needs. Techniques such as product bundling can help boost sales, by connecting the consumer’s journey with the products.

New innovative products or packaging that can increase consumer convenience, can help this category grow back demand to an extent.

5. Packaged Foods

With the revised GST rate of 0-5% and various government initiatives like Production Linked Incentive Scheme for Food Processing Industry (PLISFPI), Project Shakti, FDI liberalization, etc, the packaged food industry is expected to grow far beyond the 5.1% growth in 2022.

Hybrid work, digital life and chilling outdoors is leaving the youth with no time and interest towards cooking. This is expected to accelerate the consumption of packaged foods. However, with more and more D2C brands entering the arena using the internet, competitive pricing would be a crucial factor in maintaining brand loyalty and market share.

6. Confectionery

Is India’s sweet tooth losing its power? With a YoY growth of 1.7% is might seem likely so. But a deeper analysis might reveal that consumers are diversifying their palate with more options. From a set of consumers choosing to count the calories they eat, to a large base of consumers looking for variety, the confectionery category is fazed with many new foreign and regional players entering the market.

Additionally, consumers are also curbing spending to match the rising inflation. This makes it difficult for want products like Confectioneries to enter the consumer’s shopping basket. Many consumers are turning to little treats to satisfy their wants.

2023 Economic Overview of the FMCG Market in India

The retail sector in India was worth $836 billion in FY22, with traditional trade having an 81.5% contribution.

Source: INDIA BRAND EQUITY FOUNDATION

As the fourth-largest business sector in India, the FMCG industry has surpassed the global market, with a double-digit growth in last two decades, while creating employment for nearly 3 million individuals.

According to CRISIL, India’s FMCG sales are expected to see a 7-9% revenue jump driven by higher prices, while volume growth is expected to negligible at 1-2%.

The Union Budget of 2022-24 by the Indian government is focused on reviving rural demand by boosting disposable income, higher fund allocation to rural infrastructure and farmers, increasing connectivity, promoting more exports and amplifying domestic demand and supply. Funds worth $976 million have been sanctioned as PLI schemes to reduce import costs and increase the cost competitiveness of Made in India products. The government is now allowing 100% FDI in food processing and single-brand retail, while the number stands at 51% for multi-brand retail. This will also help drive growth in 2023 for many FMCG companies in India.

Rural India contributes to over ⅔ of Indian retail and will remain crucial for revival of FMCG sales. Branded products are also seeing increased in demand in the rural heartlands.

Another gradual shift that is becoming visible in the India FMCG market, is the rise of organized trade and the decline of the unorganized sector as consumers become more brand conscious. And in 2023 too, this change will continue to prosper.

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Buy Now Pay Later – All You Need to Know

animeshbajpai — Tue, 13 Sep 2022 06:00:08 +0000

Buy Now Pay Later – All You Need to Know

by Akshat Saxena

September 13, 2022 | 03 min read

While digital payment services were already on the rise, the pandemic brought about a paradigm shift in the digital payments landscape in India. And one of the sub-industries that is growing phenomenally is Buy Now, Pay Later (BNPL) services, especially in the retail B2B space. Our services offer instant, short-term credit to SMBs such as shopkeepers and kiranedaars.

Shopkeepers, dukaandaars, and kiranedaars are the backbone of the Indian retail economy and make up the largest chunk of the retail industry. And even though a huge chunk of the retail business in the country is credit-driven, most of it is informal. The resources that the industry needs to modernize and scale up to have always been beyond its reach. And a significant reason for that has been stunted access to working capital. Our services help such small business owners get instant credit so they can source stock from various PAN-India suppliers at the best prices. Thus, it helps them grow and better profitability.

For small-time shopkeepers and dukaandars, bank loans are tedious. They not only take a long time to get approved but also require them to pledge collateral. Shopkeepers don’t need burdensome loans but rather smaller-sized credit products that they can access easily to buy supplies inventory. This is where ePayLater’s services come in. It gives kiranas access to interest-free liquidity, i.e., working capital of up to INR 25 lakhs. Plus, there’s even a 14-day interest-free credit period.

The idea is to allow dukaandars to get credit akin to distributors’ credit but access it via a formal channel not circumscribed by a personal trust. It will enable them to order supplies and inventory from any supplier across India and also get great discounts/schemes. Consequently, this results in the stocking of fast-moving products, more sales, better customer loyalty, higher turnover, and higher profits.

Credit for everyone: The kirana is a business segment that deals majorly in cash but doesn’t possess a paper trail for getting credit from formal or traditional sources. Our services employ technology to insert ourselves in the chain, using the advantage of the commission spread to extend short-term credit to retailers. With the delinquency rate being just 0.15%, this credit innovation is sustainable to the point where it finances not just lifestyles but rather livelihoods.
Expansion of the credit system: Credit cards have a very small penetration in the country, along with significantly less point-of-sale credit. Our services help more people enter the credit system. Our offerings take much lesser time to get approved as compared to credit cards.
The rise of the kirana: ePayLater’s services allow 14-30 days on each purchase, thus allowing shopkeepers to align them with their own working capital cycles. This is hugely beneficial instead of having a single billing date like credit cards. Our services do away with any sort of predatory pricing. They don’t encourage revolving credit either, with the objective being to remove the cost burden from small-time businessmen and retailers. As a company philosophy, ePayLater doesn’t wish to benefit from its borrowers’ inability to pay back the loan on time.

Combining benefits: ePayLater’s lifetime-free EPL card combines the benefits of buy now, pay later services with that of a credit card. The card allows dukaandaars and kiranedaars to buy stock from any supplier across India. Since it has no annual or joining fee, setting up the card is very simple, and the credit can also be used anywhere. Our algorithm crunches a lot of useful data and arrives at this unique digital credit solution for the average kirana.

Applying for instant credit with ePayLater’s services is very simple. One must be 18 years of age and have an Android smartphone, PAN and Aadhar card. Download the ePayLater app and log in with your mobile number and an OTP. After accepting the ‘Terms and Conditions’, click on ‘Apply Now’ to continue entering your PAN card details. The KYC process with Aadhar and OTP is next to allow access to your Digi locker account. After that, all you need to do is enter your bank and business details, sign the agreement, and register for eMandate to get a pre-approved credit limit of INR 2 lakhs. Your credit limit is approved in a matter of 2-3 business days. If a retailer/dukaandaar applies through the partner merchant portal, then many of these steps can be skipped.

So, what is the difference between credit card and BNPL? As opposed to the mere 2% card penetration in India, BNPL services such as ePayLater are ensuring that a greater number of people become part of the credit system. Furthermore, our services are form-agnostic compared to the plastic nature of credit cards. But, one of the biggest advantages of buy now, pay later is that the process is hassle-free and quick, while credit cards take a lot of time to get approved.

Furthermore, our services allow 14-30 days of interest-free credit on every purchase. Kiranedaars and dukaandaars can easily align their working capital cycles with our interest-free credit cycle, as they don’t have to adhere to a single billing date. Our services don’t intend to make money off of interest on deferred payments, revolving credit, etc., but rather work to eliminate the cost burdens of shopkeepers. The idea is to not take advantage of any inability on their part to pay on time.

Credit cards are a rather impractical product when it comes to India’s retail business, even though a majority of the business is driven by credit. For one, their approval process is a long and rather daunting one. Secondly, single billing dates don’t exactly match up with working capital cycles when kiranas require money to buy inventory at the rates that they want. If that wasn’t enough, credit cards are very expensive, as they charge everything from annual fees and interest on interest, but even late payment fees.

As compared to that, our services, as we mentioned earlier, offer immediate interest-free credit for 14 days. This allows kirana shops, all eligible credit users, to line up their working capital cycles with the credit we provide. What’s more, our services are easy to set up and use, and we don’t have annual fees either. While we do have a late payment fee, the delinquency rate is less than 2%, which means that this setup works better for kiranas as compared to credit card structures. Essentially, we act as allies to kirana stores, helping them grow sales, customer loyalty, and, consequently, their business by providing them credit without the hassles associated with a credit card.

Half of India’s working population, which is almost 20 crore people, is credit active. Even though credit cards have been around for a long time, the Indian credit card market is still severely under-penetrated. SMBs such as kiranas find it hard to have a foot in the door since they can’t exactly swipe credit cards to stock up on inventory. And being excluded from this narrow circle of ‘credit trust’ is a major hurdle for enterprising mom-and-pop establishments that want to grow and expand.

This is where BNPL is poised to be the next big thing in India’s retail B2B space. In fact, the popularity of BNPL services went up by a whopping 600% in 2021, and it’s easy to see why. Many round-the-corner kirana stores turned to BNPL services during the pandemic looking for credit to extend their stock-buying capabilities. Due to the huge uncertainty in these times, BNPL services helped them access credit at a time no one would have given them credit easily. ePayLater’s services allow kiranas to defer payments for purchasing stock towards the end of the billing cycle. Our short-term credit solution splits repayments into flexible instalments, and that too without interest for a period of 14 days. With no hidden fees or high-interest charges, the popularity of BNPL services such as ePayLater is only poised to climb the charts.

1. How does BNPL make money?

Intermediary services, such as ePayLater, use algorithms to crunch a ton of numbers relating to financial and credit backgrounds. We employ technology that allows us to place ourselves in the middle and earn a commission from suppliers by paying them immediately after delivery. As a result, we use that spread to borrow from banks and extend instant, short-term credit to smaller retailers.

2. Is buy now pay later an instalment loan?

Yes, BNPL can be considered as a kind of instalment loan, as retailers pay back the credit amount in parts. After an interest-free credit period, in our case 14 days, interest is charged on the amount that retailers borrowed and spent. In case retailers fail to pay back the amount within the stipulated period, the penalty is levied.

3. Do you pay interest on buy now pay later?

Yes, you will have to pay interest on BNPL services, but only if you don’t pay back the borrowed amount in the interest-free credit period. After the initial credit-free period of 14 days, we charge a penalty interest of 3% every month from the date of the transaction. Plus, there could also be additional charges levied, such as bounce charges if the account balance is insufficient or late payment fees. Additionally, GST is applicable on the late payment charges.

4. Where can I use the buy now, pay later option?

In the case of our services, you can use our services directly via the ePayLater app, any time and from anywhere. After signing up and registering for our services, you can use our facility to make the payment by choosing the supplier you want to make the payment to, entering the amount, the invoice number, and a copy of the invoice. Choose your preferred mode of payment (net banking/debit card/UPI), enter the OTP sent to your registered mobile number, and confirm – it’s as easy as that.

5. Does BNPL affect credit?

As long as one repays the amount on time, i.e., within the interest-free credit period, one’s credit score won’t be impacted. In fact, clearing the amount on time not only assures you peace of mind but could also improve your credit score. Also, ePayLater doesn’t charge users for pre-payment of credit borrowed. However, if you delay or miss your payments, then your credit score could fall.

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Budget 2022 Strengthens The Long Term Foundations For Indian FMCG

animeshbajpai — Wed, 02 Feb 2022 20:24:33 +0000

Budget 2022 Strengthens The Long Term Foundations For Indian FMCG

by Akshay D'Souza

February 3, 2022 | 08 min read

We live in a world where a wave isn’t necessarily the ocean wave that helps calm the mind and kindles fond memories. Instead, it’s often a reminder of the pandemic that’s repeatedly affecting and altering the way we live.

Another life-altering event in the life of any Indian business is the country’s annual budget which our finance minister has yet again brought out on 1st February 2022.

This, oftentimes can significantly change the way business is done & the manner in which consumption will grow.

All this macroeconomics can often be super confusing and meaningless to people like us, but we’ve tried to understand which way the wind is blowing.

We analyze sectoral impact by looking at three key pillars of consumer companies:

1. BOOSTING DEMAND

Higher Capex: Up 35.4% from Rs 5.54 Lakh Crore to Rs 7.5 Lakh Crore will boost direct and indirect employment. This will help enhance demand over the medium term.

Rural Economy: Spends such as the PM Awas Yojana, PM Gram Sadak Yojana, and MGNREGS will drive the rural economy by creating livelihoods and improving accessibility.

MSP payment to 163 Lakh farmers: Procurement of wheat and paddy will lead to over 2.37 Lakh Crore allocation to MSPs.

USO for Broadband in Rural Areas: 5% of USO will be utilized to enable Broadband and Mobile penetration in Rural areas.

Bizom Outlook: Clearly, the government is mainly focussing on medium to longer-term measures rather than short-term appeasement fixes to drive demand. This is definitely the harder path and needs to be applauded. Also, there is clearly the thought of bringing prosperity for the whole of India, connecting rural India strongly with the rest of the country, which is visible in the various allocations being done for rural India.

For FMCG companies, moving to Direct Distribution in rural India is becoming easier, and going in this direction, it will only get simpler with time. We’ve also seen rural being the key pillar of growth in the short term, and with these structural changes, we can see Bharat becoming the key growth pillar for India in the years ahead.

We see this being a validation of strategy for FMCG companies like Dabur, Godrej Consumer, ITC, and HUL, which are focused on building strong Direct Rural Consumption channels.

2. ENSURING EASY SUPPLY OF INPUT PRODUCTS

Higher MSPs for steady supply: An increase in allocation for MSPs, leading to higher MSPs will help ensure strong Agri produce. However, it does have the effect of taking inflation further up, especially in the food processing industry, where it is a crucial input factor.

Organic is good: Chemical-free Natural Farming will be promoted throughout the country.

Millets on your plate: Also, 2023 has been declared as the International Year of Millets. There is support for enhancing domestic consumption and branding millet products nationally and internationally.

Reduce Oil Imports: Make supply ingredients by increasing oilseeds production domestically and reducing import dependency.

Financial Inclusion: Driving financial inclusion in rural arrears to enable growth – In 2022, 100 per cent of 1.5 lakh post offices will come into the core banking system enabling financial inclusion. There will be an online transfer of funds between post office accounts and bank accounts. This will be helpful, especially for farmers and senior citizens in rural areas, enabling interoperability and financial inclusion.

Bizom Outlook: We’re seeing a solid encouragement towards organic and local millet-based product consumption in this budget. This is an encouragement towards healthy foods and also a pat on the back to the many startups, who have ventured into this space early over the last 3-5 years. With brands such as Soulfull being acquired by large companies like Tata Consumer Products, we can expect to see many of the large brands putting an increased focus on developing and putting out branded products in this space.

Cooking Oil prices over the last year have been hyper-inflationary. It has consistently been among the largest import expenses for India for many years. While it’s great to see the government take steps to correct this systematically, it will be a while before we reap any tangible benefits of increased domestic production. Till then, we remain at the mercy of global imports.

3. IMPROVING THE DISTRIBUTION NETWORK

A Logistics exchange is coming up: Unified logistics (Unified Logistics Interface Platform) will simplify the movement of goods by creating a data exchange among all mode operators (logistics players), which can be further designed for an Application Programming Interface (API). Potentially, this can reduce time and significantly reduce documentation, enabling the free flow of goods.

5 spectrum auctions are coming up: Required spectrum auctions will be conducted in 2022 to facilitate 5G mobile services rollout within 2022- 23 by private telecom providers.

Bizom Outlook: The enablement of 5G will give a big boost to enhance the omnichannel strategies of companies and will feed into the ambitious Open Network for digital commerce, that is being envisaged to help democratize online consumer demand.

NEW DIRECTION:

While the finance minister said these, it’s also essential to understand some important new announcements and if there is a way of leveraging those.

Introduction of the Digital Rupee for efficient and cheaper currency management
Income from Virtual Digital assets is to be taxed at 30%

Bizom Outlook: The government seems to have acknowledged the presence of Blockchain and other technology-based decentralized digital assets as a source of income. There seem to be definite benefits in using these, especially in terms of speed and cost while making cross-border payments. The inherent volatility of these digital assets notwithstanding, these look like they will become the key mechanism for any cross-border commerce. This can be very useful in reducing supply cycle time, leading to a lower inventory requirement for FMCG companies. So, if you’re not already looking at these as of yet, it may be a good time to start. No news is also great news! There’s been a general direction on increasing taxes for tobacco & associated products. The WHO has been recommending a 75% tax on these products. Surprisingly, Budget 2022 makes no mention of tobacco and increased taxes on them this year. Bizom Outlook: This automatically makes it positive news for companies like ITC, VST Industries, DS group and others in this sector. It also gives these companies more time to diversify into other areas of growth by leveraging on their existing distribution muscle built on the back of tobacco and its associated products. In Summary, There is no short-term silver bullet for the FMCG industry in this year’s budget to drive up consumption. With no extra direct income in consumers’ hands through tax cuts or even increased MNREGA increased allocation, the focus is on driving consumption through indirect means. While the emphasis remains very strong on driving rural consumption, this is being done while creating jobs and improving the country’s infrastructure by connecting Bharat stronger with the rest of India. In the past, India has demonstrated a great ability to leverage digital for growth with Aadhar, UPI etc. This remains the focus to drive growth and opportunities. With the logistics exchange and 5G, we will see this moving further ahead and becoming a key enabler in the future for the Open Network for Digital Commerce that the government is envisaging. Promotion for millets, chemical-free natural farming, and domestic oilseed production are all directional enablers of where significant consumption growth can be expected in the years to come. Driving consumption in the immediate short term will need rationalization of high inflation through the reduction in prices of Oil, Fuel, etc. With increased MSP allocations, this isn’t going away in a hurry.

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Will FMCG Defy Lockdown Woes? Our Data Says, “Yes!”

animeshbajpai — Mon, 26 Apr 2021 23:07:27 +0000

Will FMCG Defy Lockdown Woes? Our Data Says, “Yes!”

by Akshay D'Souza

April 27, 2021 | 03 min read

Last year, around the same time, the country went into the throes of a lockdown.

Here’s how Indian FMCG performed vs the GDP in 2020-21.

QUARTER	GDP	FMCG Growth
Quarter 1	-23.9	-5%
Quarter 2	-7.5%	+6%
Quarter 3	+0.4%	+17%
Quarter 4		+10.2%

FMCG has definitely been a vital link in helping India’s GDP get back on track in Q3.

Last year, supply was impacted due to inadequate raw material availability and restricted workforce availability due to reverse migration. Distribution was hit due to Kiranas shutting shop due to supply unavailability and due to the difficulty in producing passes required for the movement of goods.

However, with lockdown 2.0 all set to unfold what’s going to happen differently?

Let’s look into the 3 dimensions – Supply, Distribution & Demand.

Manufacturing & Supply of products:

Raw materials: Brands have stocked up smartly this time on supplies of Raw materials. Over the last few quarters, we’ve seen an increase in the prices of raw materials leading to product price increases. Despite this, consumption has remained steady which has helped maintain the pace of production and sourcing of raw materials.
Workforce: The current lockdowns announced across states exclude folks from manufacturing which will help maintain a high level of attendance & industrial activity to keep production at high levels.
Reverse migration mitigation: A key impact was also the reverse migration of the blue-collar workforce on the announcement of the lockdown last year. This has largely been kept in check with the government & industries guaranteeing the food & welfare of these workers. This will play a key part in ensuring that industrial output stays on track.

Product Distribution:

Kirana availability: These are the lifeline of India’s FMCG business and with over 7.5Mn kiranas operating on Bizom, it was a shock to see a large number of these shut shop on the announcement of lockdown last year. This year however, the number of Kiranas shutting shops has been much lower (~10% this year vs ~70% last year) & which will ensure that consumers do not hoard & moreover they can get products home-delivered from their neighborhood store.
FMCG salesforce: While restrictions are in place, the industry learned how to manage remote orders taking on the back of technology. In Bizom’s FMCG salesman report, we analyzed the market working of over 50K salesmen during this last year. It’s heartening to see that despite the time spent in the market going down by almost a third in the last year, productivity was up. This helped shore up FMCG sales in Q3 & Q4. The adoption of technology has made it possible to work smartly & efficiently. This has helped the industry leapfrog by a few years.
Kirana self-ordering: Not just in India but across emerging markets, we’re seeing Retailer Self ordering emerge and the emergence of B2B marketplaces. This helps the brand ensure product supply to the retailer at a time when he needs it. This pull-based distribution is changing the fundamentals of how products are ordered by Kirana stores and driving the next generation of change for the industry. On the Bizom Retailer app, we’ve seen the average drop size increase by 2.5x on the back of just creating product awareness for the retailer on his self-ordering app.

Consumer Demand:

On the demand side, we do see differential demand emerging depending on the product type. Here’s a chart to give perspective as to how we can expect to see demand panning out across product categories in Q1FY2122

So, while India is in the midst of lockdown 2.0, we can be assured that this one won’t have severe economic implications as we had last time around. The industry has become stronger from last time and ensured an uninterrupted supply of products. This will play a critical role in ensuring the FMCG juggernaut continues to move forward.

Early trends in April are heartening and we can definitely keep our hopes up in expecting Q1 growth, not just over 2020 but also over a 2-year period.

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Will Indian Bathing Soaps Finally Care for the Skin

animeshbajpai — Mon, 25 Jan 2021 02:51:59 +0000

Will Indian Bathing Soaps Finally Care for the Skin

by Akshay D'Souza

January 25, 2021 | 01 min read

Why has the Sebamed vs HUL battle ensured consumers win?

Till about a month back, not many knew about Sebamed, this little-known brand that was still trying to get its foothold in India. Cut to a month later, and their commercials have been the talk of the country. After all, it’s not often that you see a David taking on a Goliath in the form of HUL.

At Bizom, we surveyed on LinkedIn to gauge public perception of the Sebamed advertisements.

An overwhelming majority of our audience believes the ads are genuine. Does it mean that consumers are better aware of how pH levels affect their skin?

It does seem so with the campaign put out on OOH, TV etc. A few days ago, the Honourable High Court allowed the commercials of Sebamed to restart (albeit without the detergent comparison to some of HUL’s biggest soap brands). It led ET Brand Equity to conjecture about a prolonged advertising war between the two brands.

After all the Pitch-Madison Advertising Report 2019 showed HUL as the biggest ad spender in India for 2019 and 2018. It will, probably, top the chart in 2020 too.

Now, HUL will spend this money on screaming out loud or use this as a conscience check to go back and build better products for the Indian consumer who has long had a raw deal.

If anything, it could lead to significant product improvements coming from the learned Indian consumer, especially in soaps.

It could mean that skincare is finally coming to bathing soaps.

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Do Month-end Sales Push to General Trade Help Consumer Brands Gain Incremental Sales?

animeshbajpai — Mon, 30 Nov 2020 01:32:46 +0000

Do Month-end Sales Push to General Trade Help Consumer Brands Gain Incremental Sales?

by Akshay D'Souza

November 30, 2020 | 03 min read

Dum laga ke haisha. Zor laga ke haisha…Jeetenge hum…haisha

War cries like this are common in India’s consumer products sales teams, especially while trying to drive the secondary placement of products in their kirana channel. Sales teams look at innovative ways and try various marketing tactics to ensure only their products fill the retailer’s shelves.

Marketing tactics could include giving aggressive ‘extra commission’ to retailers, especially in the last week, buying prominent shelf space at the shop on a monthly rent, and paying for signage either in-shop or storefront. These tactics are adopted to ensure that you are able to place a very high volume of products.

However, like a yo yo, this huge stock placement in the last week, leads to a drop in sales from those brands to the retailer during the opening week of the following month. Cumulatively, these two weeks (the last week followed by the next month’s opening week) determine the net impact of secondary sales.

Co n sumer demand though is often not as elastic as this secondary sales push leading to challenges like overstocking at kiranas. It results in slowing down of otherwise fast-moving consumer goods offtakes and leads to lower ROI for the kirana. For products with short shelf life like ready foods, milk, idli and dosa batter etc., it could also lead to high returns, leading to a loss for the brands.

So in order to see this impact, we look at analyzing the net impact of these two critical weeks, not just for a given month but for a longer period of time. We have analyzed eight categories to understand the phenomenon.

Do month-end sales push to drive growth?
Which categories indulge in month-end sales push?
Which categories have made this work?

a. Does month-end sales push to drive growth?

Summary analysis (Jan-Oct 2020)

The net gain in monthly sales across all categories has been a measly 0.7% despite having an ~20% spike in kirana sales every month.

2020 has definitely been an unconventional year. While normally, we would have seen a flurry of activity at the end of Mar-2020, the lockdown imposed during that time purged the surge.

As a result, Feb-2020 showed the highest net monthly gain (~26%) followed by Aug-2020 (~14%).

Month	Sales change vs rest of the month (%)	Net monthly gain
1st week of the month	Last week of the month
Jan-20	-16.1%	20.3%	4.2%
Feb-20	-26.1%	52.8%	26.7%
Mar-20	13.3%	-37.4%	-24.1%
Apr-20	-38.9%	20.9%	-18.0%
May-20	-21.6%	24.7%	3.2%
Jun-20	-17.9%	17.0%	-0.9%
Jul-20	-15.2%	20.0%	4.8%
Aug-20	-16.7%	31.1%	14.3%
Sep-20	-16.7%	17.2%	0.6%
Oct-20	-31.3%	28.0%	-3.3%
Avg monthly	-18.7%	19.5%	0.7%

b. Which categories indulge in month-end sales push?

Product shelf-life is among the key indicators to determine the extent of a month-end sales push. Out of the eight categories we track, we’ve seen a high volume of push, especially for longer shelf-life products.

Categories such as Dairy and other cold chain products see way less push. That is understandable since any returns from the market will only hit them directly.

c. Who’s benefiting from this?

Only three categories have been able to drive positive monthly growth with this month-end sale push to general trade outlets, namely Consumer Durables and Homecare.

In fact, some categories that were bouncing back from the effects of the lockdown have leveraged this opportunity to driveway higher growth than ever before.

(Cumulative monthly growth rate from Apr-20 to Oct-20)

Two of these three categories that have grown the most on account of the month-end sales push were struggling with just a fraction of their usual sales (down by up to 90%) in Apr-20.

It’s great to see that these brands have been able to leverage age-old sales wisdom and marry it to their production capacities to ensure the market is well stocked with their products.

Consumer durables have managed to go from zero in lockdown, as the worst affected category to ‘Hero’ now as we moved into the festive season. An approx 10.4% monthly growth is phenomenal but we need to understand that it’s on the backdrop of the industry having the hardest fall and bouncing back with double the vigour.

Homecare has leveraged this effectively to drive consistent growth while consumers initially went about sanitizing everything around them till finally, they have been fatigued from doing this continually.

Personal care, which suffered the effects of lower people interactions driven by the pandemic and the lockdowns, has in Oct-20 seen sales almost reach their pre-lockdown levels.

We must understand that this sales push is only half the battle won (ok, maybe a little more than half). Finally, the most important thing is to derive brand pull which when multiplied by availability creates winning brands in the market.

BRAND PULL + AVAILABILITY = WINNING BRAND

To those of you actively involved in this business, I’d love to hear your perspective on this practice that’s part of the sales playbook for almost every Indian consumer products company.

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FMCG distribution is being taken over by them…

animeshbajpai — Mon, 09 Nov 2020 05:41:23 +0000

FMCG distribution is being taken over by them…

by Akshay D'Souza

November 9, 2020 | 02 min read

Distributors can be the lifeline of a business. A healthy distributor in turn leads to a healthy business. Yet, India has among the most complex distribution systems compared to any other place in the world. It’s also very inefficient. Why?

A kirana store gets its supply from 100s of distributors and therein lies the inefficiencies. Why can’t they be served by say 10 distributors or even just 1 maybe? This would save time, cost and improve efficiency tremendously.

Here’s how I see the future distribution models unveiled for FMCG products from Kirana.

So while kiranas contribute ~85% of FMCG sales today, it is estimated that this will remain a high 65-70% over the next decade. This means that the friendly mom & pop, kirana stores will continue to remain the key channels of distribution for convenience.

Distribution to these kiranas though, is going through change. Rapid change!

Traditionally, distribution has been a family business passed down generations in the post-independence era of India. With the emergence of multiple channels of distribution, the margins and control exerted by this fragmented distributor community are dwindling.

Also, the priorities of a generation born in modern India are changing rapidly, leading to high attrition of distributors who are getting increasingly difficult to replace.

These are some of the big changes we’re seeing happen

1. There is a transition happening to 1000s of larger geo-distribution companies vs current lakhs of small micro distributors

Many small distributors are moving out of the business at a rapid pace & at the same time, we’re seeing multi-brand distribution is coming of age. There’s the emergence of many, large multi-brand distributors handling distribution for a number of brands. A number of such companies already leverage tech (from Bizom) such as OrangeTag, Khimji Ramdas and GAG. Over the next decade, we do see this as a lasting shift as businesses look to simplify their distribution model and focus on driving brand impact with consumers and product development.

2. Connected Vending Machines companies become the NEW DISTRIBUTORS

Picture this, India with ~10Mn kiranas ~ serves 120-130 people per outlet. Countries like Japan with ~3Mn vending machines serve ~ 43 people per machine. We will see an increase in the number of new supply points in the form of these vending machines.

I also imagine these vending machine manufacturers and distributors to evolve to a model of becoming an end-to-end distributor supplying products & restocking as well as maintaining the machine itself. This change is happening across categories and we will see rapid evolution in this space beyond beverages.

It’s all happening, now & it’s coming together very fast. This decade’s gonna be one where machines take over a significant share of distribution in India and emerging economies.

3. B2B aggregator platforms are stepping in to offer a comprehensive availability of a large number of products

Currently, kirana stores are challenged in managing the supply

They spend hours, daily, trying to stock products from the many salesmen who come to take orders from them for a given company product. This takes their focus away from consumers, which should be their primary business focus.
With a single brand distributor, Kiranas often need to buy products they don’t want in exchange for getting stock of pull products.
Kiranas can order products from a company only when their salesman visits them either twice a week, once a week, fortnightly or even monthly. This often causes a loss of customers who prefer to move to the next outlet to get their favourite products.

Numerous B2B companies are now offering the capability of time ordering 100s of products from a single source. There are brick & mortar players such as Metro, Best price modern wholesale etc to online players such as Bizom, Jumbotail, ShopKirana, Udaan etc.

So while the future’s evolving, one thing that’s certain is that distribution in the current form is going to be as extinct in this decade as maybe this…

And like in all evolution, information and technology will have a very big role to play.

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Move over Lipstick Index, it’s the Chocolate Index that drives us Indians!

animeshbajpai — Wed, 30 Sep 2020 06:54:54 +0000

Move over Lipstick Index, it’s the Chocolate Index that drives us Indians!

by Akshay D'Souza

September 30, 2020 | 01 min read

The pandemic is well and truly here in India. Daily cases are around the 1 lakh mark no and we’re still learning to live with the pandemic to earn our livelihood.

So, is it all gloom and doom? Is there a God?

Did he send enough monsoons so we can grow our crops? And use it to manufacture the products that we so finely brand, distribute and make some money? So people can continue to earn their livelihood through these struggles?

The answer to the above is, YES!

The Indian Meteorological Department (IMD) (famous for weather predictions in India :)) says this “Rainfall is likely to end in the normal or above normal category,” IMD director general Mrutunjay Mohapatra said at a press briefing

That’s good! The future looks bright for sure, what with IPL giving India such super-over thrillers that help us forget all the pain. Also, the festival season excitement is palpable with God expected to shower his blessings while we humans shower ourselves with gifts and sweet treats.

And in other news, the Indian economy has contracted by 23.6% in Q1

Now, a very famous man named Leonard Lauder (Chairman of the Estee Lauder board in 2000) got some of his fame by coining the term LIPSTICK INDEX. His claim was that lipstick sales could be an economic indicator, in that purchases of cosmetics – lipstick in particular – tend to be inversely correlated to economic health.

So, we decided to look deeper into Indian buying behaviour to look for ~~products~~ want-products specifically (not need-products) that were being bought higher than normal.

The daily active kiranas (kiranas placing an order on a brand) are only increasing and trending upwards in Aug-20. It’s now significantly better than Q1.
Confectionary products are easily the biggest gainers! They’re followed by beverages that could have had a potentially solid season if Out of home consumption had remained strong.

While they had the biggest impact of the supply disruption in Apr-20, they’ve bounced back dramatically and are also a favourite stocking product at Indian Kiranas. Almost 30% more outlets are stocking them now for the last 3 months since the restoration of the supply chain.

Chocolates do provide comfort to Indian consumers in challenging times and we’ve happily consumed them to keep our minds focussed on the good things in life.

I’m proud to present to you the ‘Chocolate Index’ as the Indian indicator of consumer preferences in times of Recession.

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Secrets of Gaining Market-share by Building a Retailer Self-ordering Platform

animeshbajpai — Mon, 31 Aug 2020 05:18:55 +0000

Secrets of Gaining Market-share by Building a Retailer Self-ordering Platform

by Akshay D'Souza

August 31, 2020 | 05 min read

Gaining market share by altering retailer behaviour through technology is no ~~easy~~ difficult task. All great things begin with a DESIRE to make it happen.

Some brands like Bausch & Lomb, Jyothy Laboratories, Praash, Unibic, Dhamija & many others brands showed great Desire to make things happen and followed it up with action. Check how they are evolving their business for a POST-COVID world

If you’ve mustered the courage, read on.

Let’s begin by emphasizing that no half-hearted attempts at experimentation with technology will cut it. Select a Retailer app that can help you execute the below. Most importantly, make sure it is tried and tested and that its users have a great experience.

1. Smoothly bring retailers into the app ordering platform:

Salesmen are the key here. They will drive your initiative to recruit retailers to the new way of working by capitalising on years of trust with the retailers.

Your friendly salesmen need to get all their outlets to start ordering what they want when they want. To do that, they need to ensure that all retailers are registered on the retailer app and then get mapped to a distributor who will fulfil all orders placed on the app quickly.

Best practice: Companies have provided Sales Incentives between Rs 5 to Rs 50 per outlet onboarded for the Retailer app depending on the category of products.

2. Make a great first impression! To ensure a great ordering experience for retailers ordering on the platform

Distributors need to keep serving the retailers like clockwork. They need to ensure that product demand is met. We have seen that the SKUs ordered by retailers are different from what’s ordered when a salesman visits them. This means that distributors need to be agile to stock the right set of brands, the right volume and the right SKUs.

Best practice: Setting a TAT and ruthlessly measuring fulfilment in the TAT is critical to success. Some companies fulfil orders in an average of under 16 hours. The best companies track exceptions and ensure distributor challenges are overcome while ensuring seamless delivery. Our analytics platform, OneView, helps brands identify very easily the gaps in execution so you can take action, quickly!

Service differentiation can also be created for orders placed on the app. Brands can look to fulfil orders on the same day for orders placed till a certain time.

If you’re looking for a last-mile delivery partner, let us know. We can help. Write to us at marketing@mobisy.com

Click here to hear first hand a Retailers experience on the self-ordering app

3. Give Retailers a strong reason to change an order from the Retailer app.

Now, you must be thinking that you’re offering retailers the flexibility to order what they want when they want rather than waiting for the salesman.

So why won’t my retailers just fall in love with the app and also thank me for it?

Change needs motivation even if the change is good and remember that it’s you, YES YOU, who needs to give retailers that EXTRA MOTIVATION!

Bizom provide extensive capability in Running Trade Promotions

Industry practices and their challenges:

Here we’ve seen companies follow various strategies including offering Trade promotions, exclusively for ordering on this channel. We’ve analyzed some of them below.

a. First order incentive only for the app ordering channel: This while being effective in generating orders has been seen to give rise to the practice of retailers downloading the app on multiple mobile numbers to get the benefit.

Verdict: Not optimal.

b. Differential first order and repeat order incentive: In this, a brand offered a 7% incentive to first-time orders and 3% to repeat orders.

Outcome: This drove adoption by retailers, however, it also led to the same problem as earlier where retailers downloaded the app on multiple mobile numbers to derive the higher benefit from the first order.

Verdict: Better than (a) but still not ideal.

c. Same first order and repeat order incentive: Here a brand offered a 4% discount compared to its other channels for all orders placed on its app (first orders as well as repeat orders).

Outcome: This ensured fast adoption on this channel and also drove repeat usage. However, order sizes remained similar to earlier.

Verdict: Better than (a) & (b) but still need to work to get a higher share of the category.

Best Practice

4. Order volume incentive along with same first order and repeat order incentive: Here the company offered a tangible incentive of an assured gift for order sizes of x and 10x. This was in addition to a fixed 2% incentive on products ordered from the app.

Outcome: This was a huge success and led to rapid retailer adoption. Order sizes went up by 5x. Outlets were now only stocking this brand for the category and in the process it was helping the company gain market share.

Verdict: Best offering in terms of market effectiveness and maximise category market share.

The above practice while being very effective, got the company wanting more.

They were puzzled. They wanted to solve this…but how?

The puzzle that was rattling everyone was how do we make this market-share gain, SUSTAINABLE, over a longer period of time.

At one end, was the futile path of deep and deeper discounting which was absolutely unsustainable.

On the other was the challenge of addressing how the brand could generate repeat purchases by ring-fencing the top 10% of retailers that generated almost 60% of its business. The answer they found in what was built into a loyalty program.

So they began by building the principles of the program.

Differentially higher benefits for ordering more over the period of the program
A program built for two quarters
Differential Incentives and services for retailers self-ordering on the app

Outcome: Sales spiked 2.5x in the loyalty period giving a 20% increase in market share
Self-ordering on apps accounted for almost 70% of total sales
A large number of incidental retailers now became their key retailers. Overall retailer universe went up 40% in the period.

All in all, the path to greater market share is not a hard one, it’s a smart one. It’s one that’s filled with lots of simple technology interventions.

At Mobisy, we’re helping over 500 consumer brands gain market share. Brands such as Bausch & Lomb have leveraged the Retailer app to put themselves into a sustainable market leadership position.

Check what Sanjay Bhutani, Managing Director of Bausch & Lomb – India & SAARC and his team did to win in the marketplace.

If you’d like to collaborate, mail us at marketing@mobisy.com.

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Rooting back to the Volume > Value era: 2024 CPG trends

28 June 2024

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Stop Reading Nielsen Surveys; Act on Real-Time Insights

animeshbajpai — Mon, 03 Aug 2020 05:24:21 +0000

Stop Reading Nielsen Surveys; Act on Real-Time Insights

by Akshay D'Souza

August 3, 2020 | 02 min read

India is an incredible confluence of cultures and cuisines. With it comes the challenge of selling and making products available that appeal to the disparate interests of these consumers. Consumer businesses focus on making products and distributing it to the urban masses to drive consumption at scale. Why?

We analyzed sales in 77 cities including metros, mini-metros, state capitals and other key populous cities. These 77 cities consist of approximately 13% of India’s population.

In Mar-20,

So, it did make sense to focus on these, right?

Wait a minute, then came COVID-19, with lockdown and unlocks, here’s what happened

In June-20

So what just happened?

We decided to dive deeper into the urban cities of India to understand better what happened. To identify regions where there’s the biggest problem in terms of sales.

1. The Big Boys: (5Mn+ population cities)

Consumption does seem to be bottoming out. However, it still does seem to be well in excess of the population it’s serving. So for now, we’ll consider it to be a good place to distribute. As cities unlock, we will possibly see this Multiple of Sales Vs Population go up further.

2. The up & comers

Consumption is the lowest here. These 30 cities need action, quickly! Currently, it doesn’t seem to give any benefit to consumption despite having population scale & urbanization.

3. The baby cities

While consumption dropped, sales of consumer goods are still 1.7x that of the population on June-20. In July, we do think this number will go up further.

Methodology:

The top77 cities were further broken down as

	Population in Cities	Sales multiples to population	Sales multiples to poulation
The big boys	5+ Million	8	6.9%
Up & comers	1-5 Million	30	4.2%
Baby cities	Sub 1 Million	39	1.7%

To get more intelligence, ask us for the city-wise sales movement. If you’d like to do something about it, then ask us for a Demo of Eagle Eye. Write to us at marketing@mobisy.com.

Let’s go, let’s get these cities running faster!!

animeshbajpai | Bizom

Consumer Behavior Insights: Unlocking the India FMCG Market in 2023

Consumer Behavior Insights: Unlocking the India FMCG Market in 2023

by Akshay D'Souza

India FMCG Market in 2023 - The Endemic edition

India FMCG Sector Analysis & 2023 Forecast

1. Beverages

2. Commodities

3. Personal Care

4. Home Care

5. Packaged Foods

6. Confectionery

2023 Economic Overview of the FMCG Market in India

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by Akshat Saxena

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Budget 2022 Strengthens The Long Term Foundations For Indian FMCG

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Will FMCG Defy Lockdown Woes? Our Data Says, “Yes!”

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Will Indian Bathing Soaps Finally Care for the Skin

Will Indian Bathing Soaps Finally Care for the Skin

by Akshay D'Souza

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Do Month-end Sales Push to General Trade Help Consumer Brands Gain Incremental Sales?

Do Month-end Sales Push to General Trade Help Consumer Brands Gain Incremental Sales?

by Akshay D'Souza

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FMCG distribution is being taken over by them…

FMCG distribution is being taken over by them…

by Akshay D'Souza

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Move over Lipstick Index, it’s the Chocolate Index that drives us Indians!

Move over Lipstick Index, it’s the Chocolate Index that drives us Indians!

by Akshay D'Souza

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Secrets of Gaining Market-share by Building a Retailer Self-ordering Platform

Secrets of Gaining Market-share by Building a Retailer Self-ordering Platform

by Akshay D'Souza

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Stop Reading Nielsen Surveys; Act on Real-Time Insights

Stop Reading Nielsen Surveys; Act on Real-Time Insights

by Akshay D'Souza

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