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Demand for branded sanitizers is cooling off as consumers are using it less frequently, with coronavirus infections receding even as smaller companies are undercutting their bigger rivals with cheaper products.

The pandemic had reset shopping behaviour as consumers focused on personal and home hygiene products. The market for hand sanitizers grew sharply in India to reach 1,000 crore in 2020, with a market penetration that zoomed past low single-digits pre-covid to 45% at the end of that year.

With severe shortage of hand sanitizers in the early days of covid-19 outbreak in India, many large companies, including fast-moving consumer goods (FMCG) makers, liquor manufacturers and sugar mills, rushed to fill the supply gap.

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But as Indians return to near normal lives and as the covid graph dips, buyers are going easy on sanitizer usage. This could take away the focus from the category going forward.

“Sanitizer penetration levels have reached about 45% vs low single digits last year. But branded penetration is declining, as offerings are accessible across out-of-home platforms, where sourcing is in bulk and direct via contract manufacturers. With excess supply and limited margin (regulated pricing), the segment is becoming less focused," analysts at CLSA said in a note on hygiene products on 11 January.

Companies said the initial euphoria and demand around the product have cooled off in the third quarter. “There were many small-scale industries which got into it and started making it, including several sugar units. Then over a period of time, the demand slowed down because of the improving situation," said Mayank Shah, category head at Parle Products that sells the popular Parle-G biscuits. The company launched sanitizers to fill supply shortages last year.

Bizom, a retail intelligence platform that works with FMCG for a range of distribution and sales automation services, estimates that as many as 350 new sanitizer brands hit the shelves in the early phase of the lockdown. The surge in supply has crimped demand for branded products.

Consumers are also buying refill packs that last them longer. “The third quarter is seeing the emergence of refill packs as consumers start using refills far more rather than the starter or dispenser packs," said Akshay D’Souza, chief marketing officer at Bizom.

In the first quarter of the current financial year, Dabur India reported 80 crore in sanitizer sales, but this dropped to 12 crore in the second quarter, according to a December report by ICICI Securities.

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