The Fast-Moving Consumer Goods (FMCG) industry is the fourth largest sector in the Indian economy, estimated to grow at a Compound Annual Growth Rate (CAGR) of nearly 28% between 2018-2020. A major reason backing this growth of market size is the increase in rural consumption rates across the country. For now, the FMCG market contributes to about 36% of the overall industry sales and holds two-thirds of India’s consumer base, which is expected to experience a variation soon.
The pandemic effectuated lockdown has brought about a significant change in consumer behavior concerning FMCG. It has sharpened the demand pattern among urban and rural consumers, the former opting for more large-sized product packages and latter opting for value packs. Also, the economic chaos has made the discretionary spending stronger in the rural markets whereas the consumers belonging to the urban market have increased the volume of purchase as they wish to make fewer visits to these retail stores. This fad could persist among the urban consumers, as people would continue pantry loading fearing shortages and the reversal of the pandemic.
Those living in urban cities are well aware of brands and familiar with their products. With a large population of migrant workers heading back to their hometowns, they seek the same in rural markets but in smaller value packs. This can be seen as an opportunity to push popular priced products (PPP) to the rural segment. The announcement of various relief packages and support through MNREGA, the rural consumption, and demand for low priced value packs are expected to grow. FMCGs like Nestle, Parle, Dabur expects the demand for low priced affordable packs and PPPs to increase post supply chains and accessibility to products progress.
“It is possible that in the semi-urban and probably in some rural market, you would start seeing the smaller packs do better. Moreover, this PPP would be of great interest to the people, who unfortunately due to their limited budgets like to have benefits of the product which they were used to,” said Nestle India Chairman and Managing Director Suresh Narayanan.
The share of online sales of FMCG has increased considerably during the March quarter. Online sales constituted 2.8% of the overall sales for FMCG companies in the first quarter of 2020. Kerala-based packaged foods company Elite Foods saw a 100% jump in online sales in certain regions for its products that include cakes, bread and buns, Indian instant mixes, flours, and a healthy range. Top executives at Hindustan Unilever (HUL) said they expect the pandemic to alter shopping behavior, with a hike in online shopping as consumers avoid going out and convenience.