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The Revival of the Personal Care Sector in 2021
We expect budget 2021 to improve overall consumer sentiment and spur consumption across target classes.
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The Covid-19 pandemic and the resultant nation-wide lockdown disrupted the functioning of every industry. Every business, regardless of size, was affected in some way or the other. The fortunes of the FMCG industry probably best tell the story of the impact of — and now the recovery of the economy from — COVID-19.
The FMCG sector is the fourth largest contributor to the Indian economy. Household and personal care products account for 50 percent of FMCG sales in India. This makes it a bellwether for the overall health of the economy.
The demand for packaged consumer goods recovered to near pre-Covid levels after the lockdown was eased allowing shops to reopen. The return of migrant workers back to their villages also boosted consumption in semi-urban and rural markets. E-commerce firms have also come to realize the importance of smaller towns and cities, with demand surging for groceries, essentials, as well as non-essential products. Online delivery platforms have been adding more pin codes to their delivery network ever since, and this trend can still be seen with customers becoming more and more accepting of digital and online solutions.
Talking about personal care products, the last calendar year has been a difficult one for the sector, especially due to the complete shutdown of stores and transport. The third quarter however saw a revival in demand as the lockdown began to ease up and many businesses have recovered. Some have even surpassed the sales figures from the pre-Covid times.
Supply chain disruption was probably the largest deterrent to business through the lockdown. Even with online business, it was difficult to reach out to retailers and send products to warehouses since very limited movement was allowed and the transport and logistics sector was also badly hit. However, most of the FMCG industry players responded well to the slowdown, with major brands switching their manufacturing to the production of sanitizers and cleaning agents. There was naturally a sizeable and urgent demand for hygiene products that one could use daily, and having a trusted brand provide the required product was an added benefit. This caused many new brands, even the ones which were not previously operating in the FMCG space, to venture into sanitizers and hygiene products, not only to make up for the slowdown, but also to remain relevant to consumers. Hygiene products are now part of customers’ regular use product list, along with personal care, hair care etc. This is a habit that we believe will stay.
Another shift COVID-19 reversed was the shift away from kirana stores. As already mentioned, even online firms found it difficult to ship products around the country during the lockdown. This put the humble kirana stores, many of whom had for some time been losing share to online retailers, back in the spotlight.
The pandemic underlined their importance to the consumer ecosystem, so much so that many online delivery and e-commerce companies have forged partnerships with neighbourhood stores.
As we have learned to live with COVID-19, consumers have become less scared. They have started to move out, order-in without hesitation and we expect the digital adoption of many new consumers to be a driving factor for online retail and e-commerce enabled manufacturers.
Considering the current geo-political scenario, companies can also now be seen moving to India to set up their manufacturing hubs. Even multinational FMCG players are now considering India as a strategic hub for competitive manufacturing, to fulfil local as well as international demand. With the government urging an “Aatma-nirbhar Bharat,” we can see many players being urged to consider setting up shop in India. The expectation from the Union Budget this year is to facilitate healthcare infrastructure and distribution, however, other industries will also require a boost. An increase in government spending and incentives to provide stimulus is going to be the key to a market revival. The personal care market in India is set to touch $20 billion by 2035, driven by increasing disposable incomes and growing aspirations, according to ASSOCHAM. Slashing income tax slabs will put more disposable income in the hands of consumers, which may accelerate consumption. We expect budget 2021 to improve overall consumer sentiment and spur consumption across target classes. The industry will be looking forward to carry on with the momentum and sustained revival across categories into the next financial year.
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.