By Sanjeev Sharma
New Delhi– Food categories like biscuits, salty snacks, instant noodles, beverages, edible oils are seeing an increase in demand as in home consumption increases while out of home consumption of FMCG products is expected to take a back seat as the lockdown keeps more people at home.
According to a research by UK broking house, Investec Securities, in the near term, out of home consumption is expected to take a back seat as the lockdown keeps more people at home.
Nestle’s Professional division, which posted double digit growth in 2019 is expected to witness some level of slowdown as offices, hotels, restaurants, airlines, educational institutions remain close/ operate at sub-par levels.
HUL’s ice-cream business will be impacted. Management in Q4 FY20 results stated, “There was near cessation of sales in some of our out-of-home businesses and ice creams business, right from mid-month, and these contributed to the revenue drop. Our ice cream business started to really see a sharp decline right from mid-month.”
Meanwhile, in home consumption has surged. Food categories such as biscuits, salty snacks, instant noodles, beverages, refined edible oils have witnessed a jump in demand.
Britannia has witnessed strong demand of biscuits. April and May has seen strong revenue growth of 20 per cent and 28 per cent respectively.
In the FMCG space, companies are looking to substitute traditional wholesale by increasing stockist count, driving growth through organised wholesale cash and carry and increasing growth through e-commerce.
“In retail, companies like ABFRL, Indian Terrain and Page Industries are likely to re-think their small MBO (multi-brand outlets) strategy and compensate the impact through larger retailers and e-commerce,” the research said.
Hand wash, Sanitizers, floor & toilet cleaners, antiseptic liquids have seen a sharp jump in sales in India. Immunity products such as chyawanprash, honey and turmeric have also seen a sharp rise in sales since lockdown started in March.
Most companies believe that the trend will continue and hence, in a scenario where manufacturing capacity is constrained, companies are focussing on these higher demand products.
While many companies have entered the Sanitizer space, fewer entrants are seen in handwash category as its manufacturing process is difficult. “It remains to be seen the longer term sustainability of this category; we believe larger brands will be eventual winners here as fly by night operators exit the market once demand normalizes,” the research said.
Colgate has launched the Palmolive hand sanitiser, Emami has launched Boroplus hand sanitiser, Jyothy Labs has launched the Margo hand sanitiser, Marico has launched Mediker hand sanitiser and Veggie Clean, in the fruits and vegetables wash segment.
In jts management commentary on health and hygiene demand, HUL said sanitizer production has been ramped up by a factor of 60 times from the pre-covid levels. We are seeing heightened consumer focus on health, hygiene, and nutritional needs.
In the lockdown period, companies have seen the contribution e-commerce sales increasing. FMCG companies have partnered with various last mile delivery apps such as Swiggy, Zomato, Dunzo, Grofers, Bigbasket, etc. to improve availability of their products. Companies expect the current crisis to lead to an uptick in ecommerce sales as people become averse to stepping out.
Most FMCG companies had made changes in their product offerings on e-commerce platforms to address distributors’ complaints of e-commerce sales impacting their sales. FMCG companies now use e-commerce to drive more premium packs, to serve niche demand spaces such as face sheet masks, beard grooming products, hand cream, foot cream and as a platform to test the success of new launches.
According to the report, even though personal care category has witnessed a decline in lockdown, we believe this category will be a major beneficiary of higher e-commerce adoption in Urban areas as its contribution to e-commerce sales in FMCG is highest at 42 per cent. In e-commerce, personal care had started to gradually pick up in Lockdown 3.0. (IANS)