How Covid-19 May Shape Consumer Goods Industry
Last time a coronavirus, the Severe Acute Respiratory Syndrome or SARS, struck the world, it helped catapult Alibaba Group into a global online retail giant. India’s consumer goods industry expects Covid-19 to do something similar by changing buyer behaviour, if not create a new online behemoth.
The central government, on advice from states, has extended the world’s strictest lockdown by another three weeks till May 3 as the confirmed cases of the new coronavirus mount in a nation of 1.3 billion people. But the government has allowed certain industries and services to resume with restrictions. And it’s expected to continue resuming economic activity in a staggered manner.
Yet, makers of staples to shampoos don’t expect consumers to start thronging markets even when restrictions are lifted in a phased manner. Instead, like in China after 2003 when people stayed indoors and realised how easy it was to order online, Indians too would avoid unnecessary trips to crowded places.
That would not only help online retail but also force brick-and-mortar stores to focus on taking orders and payments online.
Here’s how Covid-19 could shape the fast-moving consumer goods industry in the months to come:
Since there’s still no cure or vaccine for Covid-19, the focus is more on prevention across the world. Ever since the outbreak, sale of sanitisers to household disinfectants has spiked. According to Nielsen India, demand jumped by nearly threefold.
Liquor makers like Diageo started making sanitisers to help counter shortage during the outbreak. To be sure that’s hardly going to be a major revenue line for India’s largest spirits company in the future. But some such efforts may sustain. While focus on sanitisers and household disinfectants would increase, manufacturers are looking at other categories. One of them is foods and supplements to boost immunity.
Nielsen India, in its survey between April 10 and 14, found a 52 percent increase in people adopting home remedies to boost immunity with ingredients like honey and turmeric. Though there’s no scientific evidence about their efficacy against the virus, companies expect demand for such products to continue ever after the pandemic wanes.
“In the post-Covid-19 world, I feel the importance of preventive healthcare, particularly with Ayurveda, and of personal hygiene will grow in the consumer mind,” Mohit Malhotra, chief executive officer at Dabur India, told BloombergQuint. “Healthcare would gain as consumers would be seeking more preventive products for boosting immunity. Even personal hygiene products like hand sanitisers would become an essential part of the monthly grocery basket.”
Hemant Malik, CEO-Food division at ITC Ltd., too expects launches of immunity boosting foods with turmeric to pick up pace post Covid-19 as consumers will get even more health conscious.
India’s FMCG companies get only 2 percent of their sales from the online channel, according to Nielsen India’s data. But demand spiked during the lockdown.
While India’s online retailers faced supply-chain glitches as movement of manpower and goods remained curtailed, growth is accepted to further accelerate as business returns to normal in phases. And manufacturers to retailers are preparing for it.
Nielsen India found that 57 percent corporate leaders want to focus on e-commerce over the next 12 months. Also, about 39 percent of consumers surveyed would increase online shopping by more than 20 percent even after Covid-19 is contained.
“E-commerce was growing. The situation now will have a long-term impact on consumer behaviour and shopping trends which may lead to online shopping growing faster,” Malik said. The rate of adoption has increased, he said.
Mayank Shah, category head at Parle Products Pvt. Ltd., too, expects online orders to pick up as social distancing will continue even after the lockdown is lifted. And Dabur India plans to launch its new immunity-boosting products on e-commerce first.
Online grocers like Big Basket saw orders jump manifold after the first lockdown was announced, causing a large backlog. The panic also brought a sea of new users who could potentially stay on.
E-grocers have witnessed a five-year leap in terms of customer acquisition due to Covid-19, K Ganesh, promoter of Big Basket, told BloombergQuint over the phone. “Consumer behaviour has changed irrevocably is very clear. We have seen users who haven’t touched Big Basket in the last nine years, despite high level of marketing. Now millions of people have come online and tried grocery.”
Online retailers, however, will have to strengthen infrastructure to be able to meet higher demand.
They will have to recruit more manpower as more people will shop online when things move back to normal, Sameer Shukla, west market leader-South Asia, Nielsen Global Connect, told BloombergQuint.
Not just manpower, Ganesh said e-commerce companies will also focus on building warehouses and hiring more vehicles for delivery to meet the increased demand.
On the last mile delivery partner front, Grofers is working on reaching pre-Covid-19 levels and will then increase its hiring. Albinder Dhindsa, founder of Grofers, too, said the focus will be on hiring more.
The rise of online retail doesn’t mean doomsday for the kirana stores. Small retail outlets have proved to be resilient in face of challenges from e-commerce and even larger-format outlets. According to Nielsen India, they still contribute nearly 90 percent of FMCG industry’s sales.
Along with online retailers and hypermarkets like Big Bazaar and D-mart, they did face disruption. But the neighbourhood grocer gained even more trust during the lockdown as majority of people relied on them for essentials. Kirana stores adapted to social distancing by taking orders on WhatsApp and payments through apps such as Google Pay or Patym.
“The neighbourhood stores have again gained relevance in the minds of consumers during this period,” Malhotra said. “This will continue in the days post-Covid-19.”
The Department for Promotion of Industry and Internal Trade is also expected to go live with an online delivery platform to connect small stores, according to the draft plan reviewed by BloombergQuint and confirmed by distributors. The DPPIT has yet to respond to emailed queries.
The platform will allow distributors, wholesalers and retailers to place orders for stock, and consumers to order household goods that will be delivery by the logistics partners.
“It may not be perfect from the word go and changes will have to be made over a period time. But the government has come up with successes as well like IRCTC Ltd. and passport services which have smoothened the process in the past,” Harminder Sahani, founder and managing director of Wazir Advisors, told BloombergQuint.
Even in this case, there are various agencies which are involved in the process so it should gain momentum over a period of time, he said.
Still, even without the government’s platform, kirana outlets and traditional retail are likely to continue as the dominant part of India’s consumer goods supply chain in the foreseeable future. As Dhindsa put it: customers may be going online during the lockdown, but the majority will still shop at kirana stores.