FMCG: Lighting Up The Cash Registers
GST concessions, eclectic consumer preferences and rising marketing budgets have boosted FMCG sales this festive season
Photo Credit : Tribhuwan Sharma
For a marketer, the festive season is a great time to come up with campaigns and product offerings that can help the brand build more relevance in the market. The most common proposition that brands generally engage in vis-à-vis attracting consumers during the festive season are discounts, pricing offers and promotional schemes. New packaging advent such as multipacks is also a big hit among consumers during this time. Rural market and Tier 2 cities are very important and thus, many brands plan and launch newer commercials and campaigns.
Volume-led growth, innovations in product launches and the monsoon have added to optimism ahead of the upcoming festive quarter. Besides this, India’s economic revival has been robust and GST has been reduced on many items of daily use.
“The festive time is the peak season for the sales of edible oil, as the consumer start preparing Indian sweets at home, with a rational increase in consumption. Therefore, we have launched Gemini Rice Bran Oil for consumers across Maharashtra and Karnataka and NatureFresh Acti Heart for consumers across the country,” says Milind Pingle, Director, Sales & Marketing, Cargill’s food business in India.
New product launches has always been the norm in festive seasons, apart from discount offers and pricing. “This festive season, we have introduced mocktails, koolers and the ethnic beverage ranges to give a wider variety of fresh flavours and fruity options,” says Adarsh Sharma, EVP, Sales, Dabur India.
Other fast moving consumer cgoods (FMCG) firms such as Hindustan Unilever, ITC, Nestle, Parle, Dabur, Hamdard, Coca-Cola India are giving special price offers both on online and offline platforms. The health and wellness category within the FMCG category has seen a solid boost vis-à-vis last year. With the ever-changing consumer preferences and lifestyle, more focus is now laid on products that are healthy for them.
“The consumers today have access to information, income has risen at a brisk rate in India and will continue rising with the expected growth in consumption, expenditure will drive growth in the sector,” says Mansoor Ali, Chief Sales & Marketing Officer, Hamdard India. “E-commerce sites is a preferred way to shop, therefore this year, an omni channel experience will be preferred by consumers as the twin-blow from demonetisation and GST rollout has ended. We will be offering trade and consumer promos on our key FMCG and Pharma brands at all points of sale,” adds Ali.
As per the Nielsen, the FMCG sector is expected to grow 12-13 per cent in the calendar year 2018, with modern trade channel’s contribution standing at 10 per cent, on the back of a favourable economic and policy environment and the easing of trade turbulence in the past two years triggered by demonetisation and uncertainties over GST. During the festive season, consumers tend to spend a certain amount which varies as per each individuals earning however, the economy may have a slow start due to the fluctuation in the rupee, but companies are positive towards the growth and expect the pace to pick up soon.
The FMCG industry grew at 9 per cent till October and rural growth was 1.7 times the urban. Growing awareness, easier access, and changing lifestyles are the key growth drivers for the consumer market. Notwithstanding the impact of the depreciating rupee and high demand ahead of the festive season, FMCG sector expects steady volume growth this upcoming festive season, aided by strong rural and urban demand.
The festive season in 2017 was a lackluster for the industry as companies had to clear existing inventory before GST came into effect. However, 2018 can be termed as the consumption year, the various big day announcements by e-commerce players in India direct us to conclude that consumer demand is on a rise unlike last year.
However, the consumer purchase shift and diversion to alternate channels is on the upswing this season especially in Tier 1/2 towns. During the festival time, consumers are also looking for the best deals and all the companies are jostling to target consumers with attractive offerings. The newer formats like e-commerce, online market places are starting to lure consumers with attractive offers and discounts. Companies are also targeting aggressive growth in these channels. Modern trade growth continues to grow ahead of traditional ones. Even though the contribution of the modern trade channels to the overall business is still low, it continues to improve. “Some categories where we see greater traction in the modern trade channel are home care, health supplements and juices,” says Sharma.
Trade incentives to trade partners, both modern and traditional by companies are the norm. “Our incentives to the trade run across the year and they are very competitive with respect to the offerings from competition. This is true for not just the traditional trade but also for alternate channels, including modern trade and e-commerce. We would, however, not be able to divulge details,” says Dabur’s Sharma.
“Our trade partners play an important role in the value chain, they contribute to the distribution and push in trade. Exciting QPS and volume target based schemes will be provided to them,” says Ali.
Spike in Spends and Sales
Estimation of the total earnings of the FMCG industry would be multiple times of the marketing spend, but the festive season does account for a substantial topline in the year. Profitability is obviously a function of the spends, and the return on investment (ROI) on volumes and topline that a company is able to extract as a result of the spends.
“Our planned investment has gone up three-fold for the health and wellness segment. The marketing budget for this segment is nearly 33 per cent of our total marketing budget. Overall, we will be investing approximately 24 per cent higher this year as compared to last few years in order to build our brands in a consolidated manner,” says Pingle.
Ali says, “For Hamdard, new products need higher spends, as the activation and trial generation needs a higher ratio of spends. The overall marketing budget is an optimum mix of these, and yes, our budgets have grown by 5-10 per cent every year, over the last 5 years.”
The FMCG industry has been growing at a steady pace. This is led by a growth in consumption and a revival in demand this season. “While there may be some headwinds in the short term, we feel the medium-to-long term growth story for India remains intact,” says Sharma.