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Adapting To The ‘New Normal’

The key to overcoming current and future challenges lies in identifying the mega trends given the current scenario that will shape the future of food.

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COVID-19 has presented unprecedented challenges for the world, with this crisis affecting various aspects of human life and no industry is immune to its effects. Though the food industry has some safeguards from the sweeping impact of this pandemic as it falls in the essential category, it still faced uncertainties early on. Local supply chain disruptions especially in transportation, shortage of labour, mandi and export restrictions and the significant drop in food services demand did have an impact of the FMCG sector. Both food production and food consumption patterns have significantly changed over the last six months and these trends are likely to sustain.

Before the outbreak of coronavirus, the FMCG industry was expected to grow 8-10% this year, according to industry research. However, owing to major shifts in purchase patterns, these numbers have changed. The FMCG segment is now expected to grow much slower by end of this fiscal. This has given rise to many new consumer trends and the industry has re-invented itself to adapt to the new normal we are navigating.

Robust Demand for Packaged Goods and E-commerce
There has been strong growth in domestic household consumption in urban markets. Demand for essentials has risen as consumers are preferring meals prepared at home. Essentials such as Atta and cooking oil are the basic necessities of every Indian household. Considering this, we are looking at an upstream growth of the packaged food industry.

Online grocery shopping also saw a marked increase during this period. With the initial lockdown and implementation of social distancing norms, e-commerce gave consumers the comfort of procuring groceries from the safety of their homes negating the need to step out. Earlier e-commerce contributed merely 1% of grocery sales in the country until mid-2017 and this may shoot up to over 4-5% this year, according to industry reports.

Rural Consumption growth

There has been faster growth in rural and semi-urban demand, as compared to urban markets. Consumption growth in rural India, which makes up more than one-third of the total expenditure on FMCG, has reached about 85% of pre-Covid levels and has outpaced urban market, which was at 70% in May 2020, as per a recent Nielsen report.

New approach going forward 
The industry is in recovery mode and the outlook for Indian FMCG segment is good. We are seeing signs of some improvements in consumption and consumer spending with most parts of India limping back to normalcy and resumption of economic activity. Near-term growth will come through innovative products and services, catering to current demands, investment in technology and focus on digital platforms for customer engagement and servicing. We will see more agile business models that can react swiftly to changing consumer demand. There is string resilience shown by the Kirana stores during this pandemic and will continue to be a strong channel for all food and grocery items. Many of the corporates are helping these kirana stores to deliver more sanitized shopping experience and also get more technology enabled. We will see a faster scale up for this.

Strong Health & Wellness Focus
Industry has seen a slew of product launches with distinct health focus, catering to the surge in consumer demands for healthier products. Cargill forayed into the health and wellness segment with its brands NatureFresh Acti Heart and Gemini Rice Bran oil along with existing brand, Leonardo Olive Oil. Brands servicing this demand are likely to see good traction. On the food safety side, we will see continued creative solutions and approaches to ensuring food safety virtually, post the pandemic. We will see introduction of many specific solution centric products, which are designed to solve health concerns.  

Technology and Automation 
The current scenario has accelerated adoption of technology and automation across the FMCG industry. With good degree of sales force automation, we are now in touch with retail customers and provide services on real-time basis through automated systems basis their requirements. This has enhanced efficiency and significantly smoothened the supply chain for end consumers. Our plants in Maharashtra and Gujarat have the fully automated refining technology, facilitating hands-free treatment of the product.  We have also implemented anti-counterfeiting technology to assure customers of product quality.

The key to overcoming current and future challenges lies in identifying the mega trends given the current scenario that will shape the future of food. Although growth has been slow in the last quarter, we are hopeful that with the right levers we will see a strong growth recovery for the sector.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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new normal

Piyush Patnaik

The author is Managing Director, Cargill's oils business in India

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