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FMCG companies took to apps, bet big on direct-to-consumer reach

The ongoing pandemic has also pushed consumers to buy goods online, a habit that is likely to stick. Keeping that in view, companies are enhancing their digital capabilities and charting out strategies to ensure their presence on e-commerce.Premium
The ongoing pandemic has also pushed consumers to buy goods online, a habit that is likely to stick. Keeping that in view, companies are enhancing their digital capabilities and charting out strategies to ensure their presence on e-commerce.

  • Firms focus on product innovations, partner with delivery platforms to ensure seamless supply of goods
  • New linkages of firms with food aggregators, hyperlocal apps, courier firms are reshaping the old model of depending solely on wholesalers

When a lockdown was imposed in India late in March to contain the spread of coronavirus, the fast-moving consumer goods (FMCG) industry had little time to lose. Demand for packaged goods, such as staples, soaps, sanitizers, cookies and tea, surged as consumers stockpiled groceries fearing prolonged closure of stores. As markets shut down and factories closed, supply of essential goods was affected. However, FMCG firms were thinking on their feet and worked not only on product innovations, but also on solutions to ensure supply.

In Chennai, CavinKare, which sells brands, such as Chik shampoo and Garden Namkeens, worked with a partner to roll out an app for its top retailers in April that let shopkeepers who stock the company’s goods locate and place orders with the company’s distributors when on-ground sales staff were missing from the market.

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“We used data and targeted the top retailers to ensure our goods reach those markets," said Venkatesh Vijayaraghavan, director and chief executive officer (CEO), personal care and alliances at CavinKare said. More than 75,000 shopkeepers in India used the app to get the company’s products.

CavinKare plans to scale the use of this business-to-business app and strengthen it from its basic avatar, Vijayaraghavan said.

CavinKare wasn’t alone in scaling up the infrequently used models to ensure supplies to markets. Companies such as Dabur India and Marico Ltd launched telephone services for retailers and rolled out a dedicated app that lets kiranas place orders.

India’s FMCG market is set to contract by -1% to -3% this calendar year, market researcher Nielsen said in its revised estimates for the sector. This is despite an estimated 3,000 products in the health and hygiene category having been launched in the September quarter alone. The ongoing pandemic has also pushed consumers to buy goods online, a habit that is likely to stick. Keeping that in view, companies are enhancing their digital capabilities and charting out strategies to ensure their presence on e-commerce.

“We are witnessing higher acceptance of home delivery, cashless transactions, and mobile payments, which bodes well for the industry. Recognising this trend, we launched the direct-to-consumer (D2C) portal, Saffola Stores, to make it easier for consumers to place orders directly. As social distancing norms continue, online purchases will take precedence and digital-only or digital-first portfolios will be of interest to consumers. We are betting big on the D2C model and digital brands to scale up our premium personal care and food business," said Saugata Gupta, Marico’s managing director and CEO.

A Nestlé India spokesperson said the company’s digital engagement has been three-pronged, including recipe and information dissemination, good nutrition, and digital activation. Nestlé saw its e-commerce business grow by 97% in the September quarter, comprising 4% of domestic sales. Hindustan Unilever Ltd, too, saw the share of online retail to its total sales volume grow from 3% in 2019 to 6%, the company said in its September quarter earnings call.

Introducing automation and digitalization across its supply chain has enhanced efficiency in processes and speed to market, Nestlé said. It has improved transparency of information to supplier, farmers, customers and consumers. During covid, Nestlé accelerated the invoicing platform with nearly 40% of them being managed digitally.

Covid has led to widespread transformation within the entire supply chain, causing a significant acceleration in digital adaption, Gupta said. During the initial months of the national lockdown Marico entered into strategic partnerships with new-age delivery startups and online food aggregators to help deliver its products to consumers.

The impact of technology on sales and distribution and logistics will very clearly go into the next year, Vijayaraghavan said. New linkages of companies with food aggregators, hyperlocal apps, and courier firms are reshaping the old model of depending solely on wholesalers, including serving consumers and retailers using platforms such as Lalamove, logistics firm Delhivery, business-to-business delivery firm Shadowfax, and food aggregators.

“The understanding of how to use hyper-local delivery and marketplaces has been a big lever in making e-commerce sustainable for FMCG companies this year," said Vibhor Sahare, CEO and co-founder, ANS Commerce, which manages online commerce (both through marketplaces and their owned websites) for a range of retail and FMCG brands.

Packaged foods and beverage company PepsiCo India said it has opened up several links to the market during the peak of the lockdown when consumers were not stepping out and D2C channels scaled.

“In line with this, PepsiCo India tied up with Swiggy and Dunzo for exclusive LAY’S and Kurkure E-stores and with Swiggy Stores for brands across our beverage category. These partnerships helped ensure availability of our products on demand and delivery within two hours. It also explored a similar partnership with micro delivery platform OwO for expanding reach into ‘at-home’ consumption of packaged water," said a company spokesperson.

The coming year will be one of automation in the FMCG and the kirana store segment as small shops look at deeper integration of technology across digital payments and placing orders of goods online through organized channels, said Samarth Agarwal, CEO, MaxWholesale, a B2B e-commerce platform for kirana stores to source online inventory. Agarwal’s company now works with 170 FMCG companies servicing 25,000 retailers. During the year it opened seven warehouses and signed up close to two dozen more companies.

Other B2B startups too are seeing their businesses prosper on the back of such tie-ups. These include firms such as ShopKirana, SnapBizz, and Udaan. Most of these companies work as a conduit supplying and managing FMCG orders to small shopkeepers, though the market for such models is still fragmented and fairly nascent.

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