NEW DELHI: India’s discerning shoppers are experimenting with newer consumer goods brands online driven by their positioning on social media, the benefits as well as the choices offered by them. Such brands are mushrooming both online and offline as fast moving consumer goods start-ups are filling in the gaps left by large consumer goods makers.
In its report, ‘Incumbents to disruptors: Adopting the start-up culture for innovation’, consulting firm EY spoke to consumers in India and analysed why shoppers are picking new-age consumer goods brands across personal care, packaged foods and hygiene.
Large or existing players, EY observed, are better at selling what they are good at making, while emerging FMCG start-ups are increasingly focusing on fulfilling unmet consumer demand. As a result, they help create categories rather than just build existing categories like the large, incumbent players. FMCG start-ups, especially those that rely heavily on data, are also more agile as they spend less time developing new products and are quick to respond to market trends. The duration of such launches in a small organisation can vary between six to eight months, while for large companies it can go up to 12-18 months given the scale of such launches. Large companies also spend more money on marketing their products while spends on research and development are capped at around 4% of their overall sales. However, it isn’t the case in small FMCG start-ups, EY observed, “tech-enabled FMCG brands spend 10% of their sales on R&D and less than 3% on marketing their goods," the report added.
India’s consumer goods market is still heavily dominated by companies such as Hindustan Unilever, Nestle, Godrej Consumer Products Ltd. For years, these companies have sold specific brand of soaps, shampoos, food products and detergents to shoppers as they built both distribution and scale in a large country like India. But as Indian consumers have evolved, start-ups have emerged as challengers offering products with distinct benefits. They range from companies such as Hector Beverages that sells ethnic flavoured beverages, to cosmetic brands such as Sugar, and personal hygiene brand PeeSafe. However, more recently, large companies too have stepped up efforts to innovate and launch brands or variants that compete with new-age start-ups.
Consumers, on the other hand, have also taken well to such brands as they offer differentiation, and more variety. 60% consumers across age groups said that social media was an important influencing factor to try a new brand; while 75% consumers chose to try a new brand because they thought it was ‘better-for-them’ (ie free from harmful ingredients, more effective or healthier), EY’s report said. Value-for-money continued to be a critical factor while making purchase decisions, the report noted. In fact, Indian consumers exhibited a strong appetite for premium products as they aspire for greater value, healthier products or natural ingredients. 80% consumers are willing to pay up to 25% higher prices if they receive the desired value.
“Today, start-ups are giving tough competition to the large consumer product companies. Thus, it becomes important for the incumbents to set an agenda for identifying evolving customer needs with speed and provide products and solutions to meet them," Pinakiranjan Mishra, Partner and National leader, Consumer Products and Retail, EY India said. Mishra added that this trend requires a rewiring of how such large and incumbent companies have operated traditionally and adopt speed over perfection. “With the advent of emerging technologies, which are disrupting the consumer products marketplace, large companies must make fundamental changes in their company’s operating model and inculcate the agile start-up culture."
EY surveyed 100 consumers across cities, age-groups, and income brackets. As part of the survey, interviews were conducted with select consumer start-ups and large consumer product companies.