Buy Now Pay Later for SME Buyers is a ‘Must Have’ for FMCG today

FMCG in India is rebuilding, and things are auguring well for the economy as we approach the festive season. Based on Nielsen data, after taking a hit during the April-June 2020 quarter, the Rs 4.5 trillion a year market has recovered well over our pre-pandemic levels. Data shows, while during last year’s lockdown, the shrinkage was 21 percent as compared to the January-March, 2020 quarter, this year it has grown by eight percent over the same level. 

Moreover, the overall market remained resilient against the lockdowns during the second Covid wave, this was largely aided by Rural which grew by 25%, and e-commerce which registered a 2.7X growth in sales y-o-y over the same quarter last year. Another indicator is that Modern Trade sales have recovered to 83% of their pre-covid levels in June. With the festive season around the corner, it is widely estimated that modern trade will reach its pre-covid levels in the next quarter. In general, the sector grew by ~37% y-o-y (on a low base) as compared to the same quarter last year.

While the overall numbers look pretty, the Indian FMCG companies continue to be innovative as well. The focus seems to be now on SKU rationalization and getting more category ‘coverage’ than ‘depth’. The companies have been fairly enterprising to capitalize on available sales channels to drive growth, with many FMCG companies actively targeting chemists to get them to carry a larger category range than they usually did. Another key focus for companies has been on upping their ‘e-commerce’ game, with many traditional FMCG companies now actively focusing on driving sales through the myriad e-commerce and digital distribution plays. 

Given the buoyancy and optimism, many such players are also using this opportunity for regional expansion – this is also being looked at as a de-risking strategy given potential future lockdowns. Needless to say, another key move has been to build or acquire brands in the essentials space to ensure continuity of business. Needless to say, all of this requires capital to be taken out from other parts i.e. the relatively stabler business areas and repurposed.

Another aspect that has now been hitting the FMCG industry hard is the rising costs for inputs, including but not limited to raw materials and logistics. For instance, most FMCG companies have vegetable oils as key ingredients, and the surging costs for this commodity have put significant margin pressures on the industry. To cope with this most FMCG companies have started increasing the prices of their larger SKUs while leaving the smaller SKUs (sachet sized – Rs 5, 10 etc) untouched. The margin pressures are also manifesting themselves in the form of fewer promotions now being considered to boost sales.

During this perfect storm, FMCG companies continue to give out ‘informal credit’ at some tier (Stockist, Distributor, or Retailer) in situations where their brand is not the leader. They are also dealing with newer and relatively more unfamiliar terrain for certain categories over channels like e-commerce and chemists. This leads to an ‘excel army’ usually draining out precious organization energy that needs to be conserved and channeled correctly in times like these.

Given this situation, it has not been surprising that Finovate Capital is now engaged in multiple ‘Pay Later’ conversations for ‘Buyers’ of these companies. The advantage for FMCG companies has been that they have now been able to Collect Faster, Streamline Credit Management and Grow Market Share through the exclusive use of dedicated lines for their Buyers. In some instances, we have seen dependency (share of wallet) for select FMCG Stockist cohorts go up by almost 35% over a 4-month period. Many of our associated partners have been able to use this precious cash to de-leverage their balance sheet and deploy this ‘unlocked’ cash flow either to combat pricing pressures or to grow their business.   

Given this uncertainty in the market due to the Covid19 pandemic, most FMCG companies are beginning to realize that Buy Now Pay Later (BNPL) programs for their Buyers are no longer a luxury, but a necessity. Collecting Faster from the market through these programs, deploying this precious capital in a more productive manner while de-risking and de-leveraging their balance sheets is now becoming a serious conversation in most Boardrooms across India. BNPL is now moving from being a CFO agenda that is driven on a best-effort basis with ‘friendly’ bankers to a more ‘strategic’ lever that CXOs and CEOs are evaluating actively and pushing through for execution. Needless to say, Digital and Finance will continue being key game changers for companies over the next year. 

Bizom has partnered with Finovate Capital to provide FMCG brands with a Trade Financing solution that can help them unlock growth potential within their supply chain using unsecured loans. To know more about this solution, connect with our team at and schedule a free demo.  

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