Will FMCG Defy Lockdown Woes? Our Data Says, “Yes!”

Last year, around the same time, the country went into the throes of a lockdown. 

Here’s how Indian FMCG performed vs the GDP in 2020-21.

QUARTERGDPFMCG Growth
Quarter 1 -23.9-5%
Quarter 2-7.5%+6%
Quarter 3+0.4%+17%
Quarter 4+10.2%

FMCG has definitely been a vital link in helping India’s GDP get back on track in Q3. 

Last year, supply was impacted due to inadequate raw material availability and restricted workforce availability due to reverse migration. Distribution was hit due to kiranas shutting shop due to supply unavailability and due to the difficulty in producing passes required for movement of goods.

However, with lockdown 2.0 all set to unfold what’s going to happen differently? 

Let’s look into the 3 dimensions –  Supply, Distribution & Demand.

Manufacturing & Supply of products:

  • Raw materials: Brands have stocked up smartly this time on supplies of Raw material. Over the last few quarters we’ve seen an increase in prices of raw materials leading to product price increases. Despite this, consumption has remained steady which has helped maintain the pace of production and sourcing of raw materials. 
  • Workforce: The current lockdowns announced across states exclude folks from manufacturing which will help maintain a high level of attendance & industrial activity to keep production at high levels. 
  • Reverse migration mitigation: A key impact was also the reverse migration of blue collar workforce on announcement of lockdown last year. This has largely been kept in check with the government & industries guaranteeing food & welfare of these workers. This will play a key part in ensuring that industrial output stays on track.

Product Distribution:

  • Kirana availability: These are the lifeline of India’s FMCG business and with over 7.5Mn kiranas operating on Bizom, it was a shock to see a large number of these shut shop on the announcement of lockdown last year. This year however, the number of kiranas shutting shop has been much lower (~10% this year vs ~70% last year) & that will ensure that consumers do not hoard & moreover they can get products home-delivered from their neighbourhood store. 
  • FMCG salesforce: While restrictions are in place, the industry learnt how to manage remote order taking on the back of technology. In Bizom’s FMCG salesman report, we analyzed the market working of over 50K salesmen during this last year. It’s heartening to see that despite the time spent in the market going down by almost a third in the last year, productivity was up. This helped shore up FMCG sales in Q3 & Q4. The adoption of technology has made it possible to work smartly & efficiently. This has helped the industry leapfrog by a few years.
  • Kirana self-ordering: Not just India but across emerging markets, we’re seeing Retailer Self ordering emerge and the emergence of B2B marketplaces. This helps the brand ensure product supply to the retailer at a time when he needs it. This pull-based distribution is changing the fundamentals of how products are ordered by Kirana stores and driving the next generation of change for the industry. On the Bizom Retailer app, we’ve seen the average drop size increase by 2.5x on the back of just creating product awareness for the retailer on his self-ordering app.

Consumer Demand:

On the demand size, we do see differential demand emerging depending on the product type. Here’s a chart to give  perspective as to how we can expect to see demand panning out across product categories in Q1FY2122

So, while India is in the midst of lockdown 2.0, we can be assured that this one won’t have severe economic implications as we had last time around. The industry has become stronger from last time and ensured an uninterrupted supply of products. This will play a critical role in ensuring the FMCG juggernaut continues to move forward. 

Early trends in April are heartening and we can definitely keep our hopes up in expecting Q1 growth, not just over 2020 but also over a 2 year period..

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