Chugging Along Nicely

2022 was a year where we saw balance return to businesses. People got back to their normal way of life or to put it another way, got comfortable with the new normal. 2023 is being pegged as the year of hope, of recovery, and one of opportunities. As we get ready to move into 2023, let’s look at the outlook for the fast-moving consumer goods (FMCG) sector, and some of the trends that will shape the year.

A recent study by Nielsen IQ suggests that the FMCG sector grew by 10.9 per cent in the

quarter ended June 2022, as compared to 6 per cent in the previous quarter. The report indicates a double-digit growth for the sector in 2022, based on the recovery of consumption and promising macro factors.

The report also highlighted that it was quarter 2 of 2022 that brought in optimism after two quarters of consumption decline. Urban markets and modern trade showed a positive volume growth, while rural markets were in slow recovery. Consumers were buying smaller packs, but more units, thereby driving the overall growth in volume. Further, the food and personal care segment fared well as compared to the rest.

We caught up with Mohit Malhotra, CEO, Dabur India to get his view on what 2023 will look like for the sector. “We hope to see a revival in rural demand in 2023. The urban demand growth will continue to be driven by emerging channels like Modern Trade and e-Commerce. The consumer shift in favour of online purchases that was formed during the pandemic is today a permanent fixture with e-commerce emerging as the most-preferred contactless method of making purchases, particularly among the millennials and centennials.”

He went on to say, at Dabur, they look at e-commerce as the Innovation Cradle for their brands. New products and format innovations, particularly in the premium range, are launched first on e-commerce. Once they build scale, they are extended to other channels.

Of their plans for the year ahead, he said, “2023 will see Dabur roll out its D2C venture ‘Dabur Shop’, which is currently in the Beta Testing stage. We are working on progressively increasing its coverage across towns. This will, over time, become a one-stop shop of the entire Dabur range, including our Ayurvedic medicines portfolio that’s not easily available on the e-commerce marketplace.”

Technology will certainly be a key driver for the sector in the year ahead. According to Rajat Wahi, Partner, Deloitte India, we are likely to see the following major trends in FMCG space in 2023.

· Continuing digitisation of businesses across the value chain, focusing on demand planning, manufacturing and logistics by setting up a digital control tower.

· We are also likely to see continued consolidation of FMCG distributors with many smaller and less profitable distributors exiting the business in favour of more efficient & larger distributors who are able to leverage technology to drive efficiency across the their

distribution operations, especially focusing on their AI-enabled demand sensing from the kiranas and larger stores through apps with retailers, sales force automation, last-mile delivery efficiency, warehousing operations automation, etc.

· Another area of major focus will be around delivering best in class customer experience and engagement in-store and online by leveraging customer data lakes for analytics and customer segmentation, creating a single view of shoppers across channels so as to better serve them, and ensuring that the assortment across channels is available to the customers when they need this.

According to FMCG major Nestlé India, the omni-channel shopper behaviour is gaining relevance and will impact categories and brands in larger ways moving forward. Digital inclusiveness is the new mantra for consumer connectivity. They further believe that, climate change and sustainability will also continue to be important for companies to focus on, where most companies will work towards reducing carbon footprint, water stewardship, investing in regenerative agriculture, responsible sourcing, plastic waste management and adopting smarter logistics.

2023 looks to be a year of recovery and continued growth for the sector. We will bring you an update early next year about the outlook, trends and movement in the sector.

Quick Take:

· The FMCG market in India is expected to increase at a CAGR of 14.9 per cent to reach US$ 220 billion by 2025.

· The sector recorded an FDI of US$ 20.84 billion between April 2000-June 2022.

· The government has allowed 100 per cent Foreign Direct Investment (FDI) in food processing and single-brand retail and 51 per cent in multi-brand retail.

· The Indian e-commerce market is expected to reach US$ 120 billion by 2026 from US$ 38 billion in 2021

Data courtesy- IBEF