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Nielsen said share of e-commerce in India’s top metros went up from 5% in January-March of 2019 to 7.3% in the same period of the current year. (Photo: Mint) (Pradeep Gaur/Mint)
Nielsen said share of e-commerce in India’s top metros went up from 5% in January-March of 2019 to 7.3% in the same period of the current year. (Photo: Mint) (Pradeep Gaur/Mint)

Lockdown: FMCG companies see surge in online business

  • Online sales were a mere 2.8% of the overall sales for FMCG companies in the first quarter of 2020
  • Research by Mintel suggests that online shopping became more popular during different phases of India’s lockdown

NEW DELHI: India’s fast-moving consumer goods companies -- both big and small -- that have for years built expansive distribution networks through kirana shops and supermarkets said the covid-19 lockdown has given a fillip to online sales as shoppers stuck at home turned to buying essentials on the internet.

The share of e-commerce in sales of fast-moving consumer goods in India remains extremely small, with over 85% of sales coming from traditional retail that includes neighbourhood stores. Online sales were a mere 2.8% of the overall sales for FMCG companies in the first quarter of 2020, according to estimates by market research agency Nielsen.

For Bengaluru-headquartered MTR Foods, sales via e-commerce moved up from 2.2% pre-covid to 4-5% now. This, said a top executive at the company, was driven by a new set of shoppers turning to online shopping.

"E-commerce fence-sitters have changed their behaviour, and their experience has not been bad or dissatisfying," said Sunay Bhasin, marketing head at the company that makes a variety of packaged food products. "We have seen our e-commerce business double—we have done tie-ups and extended our own e-commerce play (owned website) to more cities and pin-codes."

Beverage company Parle Agro that sells the popular Frooti and Appy Fizz brands has seen its online sales jump manifold. "We have already seen a 300% increase in sales on the e-commerce platform in the last month. Now, with an increase in the number of platforms that we partner with online, we are targeting ten-fold growth," said Nadia Chauhan, joint managing director and CMO, Parle Agro.

The company's brands are available on BigBasket, Grofers, Milk Basket and Flipkart. Tie-ups with Amazon and Zomato are on the anvil, said Chauhan.

It has also lined up specific stock keeping units and brands for e-commerce as it hopes to increase the contribution from online sales to 15%.

Kerala-based packaged foods company Elite Foods saw a 100% jump in online sales in certain regions for its products that include cakes, bread and buns, Indian instant mixes, speciality flours and a health range.

"But we faced some challenges, such as lack of manpower, no deliveries in containment zones and difficulty in securing entry to hotspots, that prevented us from doing better business," said Danesa Raghulal, executive director, Elite Foods. It continues to sell online via Swiggy and Big Basket. "We will also look at increasing our online business significantly in the future," Raghulal said.

The company’s products are available in 70,000 outlets in south India and Maharashtra.

Research by Mintel suggests that online shopping became more popular during different phases of India’s lockdown. Around 41% of those surveyed by Mintel aged 35-54 had increased online shopping vis-a-vis 30% aged 18-34, suggesting higher adoption among those who were previously averse to buying goods online.

In a post-earnings call last month, top executives at Hindustan Unilever (HUL) said they expect the pandemic to alter shopping behaviour, with an uptick in online shopping as consumers avoid going out.

"We could see that the relevance of the humble grocers could go up. As people become averse to stepping out this should give a fillip to e-commerce and we would be ready for that," Sanjiv Mehta, chairman and managing director, HUL, said.

Earlier this week, Nestle India said contribution from e-commerce went up significantly during the March quarter.

In its report on consumer behaviour during the pandemic, Nielsen said the share of e-commerce in India’s top metros—Nielsen counts 52 cities as metros, or those with a population greater than 10 lakh—went up from 5% in the January to March quarter of 2019 to 7.3% in the same period of the current year. Nielsen follows a January to December calendar.

Capital Foods, which sells under Ching's Secret and Smith & Jones brands, said its share of online commerce doubled too, growing from 2% to 4-4.5%.

“There was some inertia initially when consumers were not exploring the e-commerce channel. But e-commerce has emerged as the great leveller," said Navin Tewari, chief executive at the company. Tewari expects the share of e-commerce to touch 10% of overall sales in FY21.

However, he said, the company will continue to supply goods first to traditional trade channels and modern trade stores that still form the bulk of its sales.

(Shuchi Bansal contributed to this story.)

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