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Crisis Brings Innovations: FMCG Industry Outlook In 2021

Food and beverage categories, particularly perishables, saw strong growth as consumers increased their monthly budget allocation for in-home food and beverages.

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Last year’s coronavirus pandemic and its subsequent lockdown has brought many significant innovations in the FMCG sector, which has put the worst behind and is looking forward to a hope-filled and optimistic 2021. Adapting to the new normal and digitalization has made the sector learn, innovate and rise from disruptions. The skyrocketing sale of essential food items, hand sanitisers and disinfectants has made the cash registers ringing throughout the year.

As the coronavirus pandemic is still continuing with some news strain of virus in the environment, the impact of economic slowdown is expected to continue till the first quarter of 2021. The success of the FMCG industry is now completely dependent on how retailers and manufacturers address evolving behavior and shifts in the retail landscape by leveraging best-selling locations (golden stores) and e-commerce, assortment and promotions.

Here are some of the trends we are expecting in 2021:

Aligning product portfolio with new normal

The companies will continue to be in sync with the new normal habits of the customers by launching new products or making some new variations in the existing ones to woo the consumers, who are also dealing with the economic slowdown of the pandemic. Their focus area will be the same including giving priority to profitable channels, sincerely keeping the track of SKUs (Stock-Keeping Units), further investing in digitisation and driving execution to meet the ever-evolving consumer demand.

Promotions will be the key

The COVID-19 pandemic has impacted the consumers’ finances as well as their shifting preferences. So, the companies can cash in on the opportunities for manufacturers and retailers to use promotions in the right way to drive incremental revenue. Through right promotions mechanics and executing them in the right time enable the companies to win shoppers royalty besides driving revenue growth and ROI. Promotion campaigns should also be designed keeping the consumer’s needs and behaviour in mind.

Adoption of digital medium

The digital medium has been adopted not just for distribution but also for marketing and advertising. Last year was probably the first time the digital medium was used extensively in the FMCG sector. It has been estimated that the contribution of digital channels in the total FMCG market would be around 10 per cent in the next ten years. But seeing the extensive use of the medium, it can now be achieved in the next three to four years. This tectonic shift towards online and e-commerce both by the companies and consumers will continue to stay for the years to come. This medium also helped the companies to connect with their consumers in the times of social distancing and stay at home.

Rural India will be the prime focus

If we see the sales demographics of the FMCG sector in India during the unprecedented times of crisis, we will understand that rural India played a significant role in it. This has actually ignited the spirit of hope in the FMCG sector and the rural economy will continue to be the giant growth engine in the years to come. Last year’s good monsoon and a plethora of fiscal packages offered by the government helped in a marked uptick in the rural sector.

Consumers are kings

The in-home consumption has increased with the closure of restaurants and shelter-in-place. Food and beverage categories, particularly perishables, saw strong growth as consumers increased their monthly budget allocation for in-home food and beverages. Therefore, manufacturers should make use of the product distribution to ensure their availability in the most-demanded categories.

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.

Amrinder Singh

The author is Director, Bonn Group of Industries

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