India’s consumption slowdown has hit product innovations by medium and small manufacturers of packaged foods and personal care goods. Innovations in this category in 2019 were down 25% compared to the year-ago period, according to data from market researcher Nielsen India.
Even large companies were not immune to the slowdown and saw innovations decline by 13%.
In 2019, consumer goods makers launched 14,000 products compared to 19,000 products launched in 2018, according to the market researcher, who defines innovations as sub-brands or variants launched in a particular year.
The decline in innovations is a result of fewer players entering the market and existing manufacturers holding on to launches in a weak demand environment.
The significant slowdown in innovations in 2019 is led by mid and small players, Nielsen noted. It describes medium manufacturers as those with a turnover of between ₹100 crore and ₹600 crore, while small are those with annual sales of less than ₹100 crore. In all, small and medium manufacturers contribute 34% to the overall fast-moving consumer goods (FMCG) market in terms of value, while more than 65% continues to come from large, national FMCG companies.
Growth in innovations was down by 25% among such manufacturers of packaged foods, personal care, and household care goods.
In all, Nielsen tracks close to 45,000 small, medium and large manufacturers across makers of FMCG in the country. These companies cater to millions of Indian households, offering local and sometimes regional brands that sell everything from confectionary to low-priced beverages, and detergent powder.
“We have observed that launches have dipped across large, medium, and small players. This is possibly a result of manufacturers holding on to their launch plans as well as fewer incremental manufacturers entering the industry," said Sharang Pant, lead, RMS and retail vertical, Nielsen South Asia.
Nielsen data also indicates that over the last few quarters, small manufacturers have also been a bigger contributor to the FMCG slowdown as a liquidity crunch and high commodity prices have hampered growth. They have struggled to compete with the large firms that doled out better offers and expanded reach to safeguard their market share. “Economic strain on account of liquidity crunch; limited access to credit and higher commodity prices leading to fading price advantage of small players seem to be key reasons for a higher impact on small and medium manufacturers. These have resulted in higher churn, slower distribution expansion and few innovations by these players," Pant said.
Large manufacturers have tided over the slowdown by launching lower-priced, smaller packs, and ramping up offers in the market.
Biscuit major Britannia Industries Ltd will wait for a few months before it launches some of its new products such as croissants and salty snacks as the maker of Good Day and Tiger biscuits awaits revival in consumer demand. The new products are in the trial phase.
In its December earnings call hosted earlier this month, the company’s managing director Varun Berry told analysts that for some of its projects such as croissants and salty salts “We haven’t moved beyond that (test market) because these are not the times to probably take these projects nationally".