Ache Din For FMCG Sector In 2022? Here Are Early Trends And Predictions
As we are all set to enter 2022 with the fear of a new COVID-19 variant named 'Omicron, there are few sectors that are likely to be back at the beginning of the outbreak, while on the other hand, there are areas that barely will have any restrictions in the upcoming time.
As far as the growth of fast-moving consumer goods (FMCG) is concerned, according to the experts, 2022 will be a year of fresh associations, partnerships and investment as retailers position their strategy, marketing techniques, business model, stores and operations are all set to flourish in a post-pandemic world.
“Direct to Retailer (aka B2B) sales will become a critical element of an omnichannel strategy. Multiple waves of the pandemic have seen disruption in supply and distribution. For a country where FMCG brands still see over 80 per cent sales from Kiranas, it becomes critical to ensure that orders from these channels remain steady. Hence, the role of technology, through either an app or Whatsapp as a medium for order taking is gaining prominence even as brands look to build infrastructure to manage any potential future disruption and optimize spends on Direct distribution," said Chief of Growth and Insights at Bizom, Akshay D'Souza.
As per CRISIL Ratings, the revenue in the FMCG sector will double from 5-6 per cent in fiscal year (FY) 2021 to 10-12 per cent in FY22. The hike in price across product categories will offset the impact of rising raw material prices. Apart from that, volume growth and resurgence will be more in demand for discretionary items.
“There will be mushrooming of numerous brands serving specific needs of a small set of customers. The niches which large brands ignore will become economically viable as these customers will be reachable viably on the web. The explosion of quick commerce through the likes of Zepto, Instamart will mean that e-commerce will start playing a prominent role in impulse categories, benefiting digitally native brands. Traditional distribution will also be disrupted with retailers ordering directly using Whatsapp and distribution through dark stores. Think cloud kitchen model applied to distribution,” said Founder of GO DESi, Vinay Kothari.
In the month of August, the daily grocery consumption and essentials in rural areas have surpassed cities in July, as compared to the trend of June. After two years, urban growth was more than rural areas for the first time in approximately two years in June. However, as the COVID-19 guidelines are easing and good monsoon rain, rural growth is likely to make a comeback and be in line with urban growth going forward.
Rural growth continues and will continue unabated as brands continue to move to direct distribution from Wholesaling. Rural growth saved last year (FY2021) for Indian FMCG even as sales in urban cities were impacted. This trend continues this year too with brands looking at ensuring their product availability with consumers across rural India. In Q2 (JAS21), we saw Rural grow 2.1x that of urban and continue to lead FMCG growth across India," said D'Souza.
D'Souza also added that consumption growth in Urban Megacities (5Mn+ popln) remains challenged and needs a booster shot. Reverse migration among the urban poor and the impact of low mobility in India's megacities saw out of home consumption fall heavily in urban India. This lack of mobility has affected many jobs among blue-collar workers and also among some white collared ones. This coupled with price inflation has impacted consumption in urban megacities of India and more needs to be done to bring back consumption growth in line with current rural consumption, added D'Souza.
According to the experts, in the year 2020, healthy products are expected to grow faster, as there are several consumers who switched to healthier options across many available packaged foods. Apart from that, consumer convenience and quality will drive the move from unbranded to branded commodities. There will be a greater number of women joining the workforce which is helping enable this change, the experts said.
"Many Digital-first brands such as Beardo, Mamaearth etc have looked offline to tap into the massive opportunity offered by Kirana distribution into the far reaches of India. Standalone Modern Trade stores aka Open Format Outlets (OFOs) and not just Organized ones are the future of Modern Trade in India. With an estimated 2 Lakh stores and growing across India, Standalone Modern Trade stores are fast emerging as a channel that will get differential servicing from FMCG companies as they look to maximize category share in these outlets," said D'Souza.
Infrastructure development will have to keep up with the pace of economic growth fueled by the new generation of entrepreneurship, mentioned Kothari while talking about challenges India can face in the future, as far the FMCG sector is concerned.
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