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Home / Industry / Retail /  As virus changes consumer habits, FMCG firms see e-commerce business booming

Fast-moving consumer goods (FMCG) companies are seeing a surge in contribution of e-commerce to their overall sales as the pandemic has led more households to buy groceries online.

Hindustan Unilever Ltd, the country’s top FMCG company, said the share of online retail to its total sales volume is close to 6%, rising from 3% in 2019.

E-commerce sales at Nestle India Ltd surged 97% in the September quarter, comprising 4% of its local business.

Packaged foods company Britannia Industries also said that its e-commerce sales have grown very “aggressively" in the September quarter even as modern trade sales have been slow to catch up.

“E-commerce has been a growth accelerator for us. Today, e-commerce has actually doubled from where it was pre-covid. It’s a shade under 6% in terms of our business and the growth rates have also doubled," Srinivas Phatak, chief financial officer, Hindustan Unilever, said last week after HUL’s earnings call.

The maker of Surf Excel detergent and Dove soaps has been beefing up its e-comme-rce capabilities over the years.

India’s FMCG trade is still dominated by millions of traditional mom-and-pop stores, despite the latest surge in online retail. Online sales have a minuscule 3% share, market researcher Nielsen said in a September report. The share is, however, more in metros.

Packaged beverage company Parle Agro said it has seen “unprecedented growth in the segment" as the supply squeeze prompted consumers to place online orders.

“A lot of people who resisted adopting e-commerce as a platform to buy from had no choice because of the supply situation, or the number of stores open or even because the fear of going out was so high. So, most people started depending on e-commerce," said Nadia Chauhan, joint managing director and chief marketing officer, Parle Agro, which sells Frooti and Appy Fizz beverages.

The curbs put in place to contain the spread of coronavirus and consumer worries about venturing into physical stores is fuelling the growth of online retail, with a lot of people ordering goods online for the first time. For FMCG firms, personal care categories helped get new consumers online, according to Nielsen.

“It’s a very profitable part of the business and every company is treating this as the most important vertical from a medium-to-long term perspective, because if you can grow your market share here, obviously your pan-India market share will improve as e-commerce grows. Though it is 2-5% for every FMCG company, in the long term it will be in double digits," said Abneesh Roy, senior vice-president, research, Edelweiss Securities.

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