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Business News/ Industry / Retail/  'Consumer trends may shift forever'
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'Consumer trends may shift forever'

Saugata Gupta, managing director and chief executive officer, Marico, said the mood among consumers is grim in the second covid 19 wave and the company will wait and watch the impact on rural demand as the cases rise

There'll be a far more focus on healthy living, healthy eating, avoiding co-morbidities, said Saugata Gupta, managing director and CEO, Marico.Premium
There'll be a far more focus on healthy living, healthy eating, avoiding co-morbidities, said Saugata Gupta, managing director and CEO, Marico.

NEW DELHI : Marico Ltd, the Mumbai-based company reported strong growth in its foods portfolio in the March quarter as households stocked up on essentials benefiting its Saffola cooking oil and oats brand. Saugata Gupta, managing director and chief executive officer, Marico, said the mood among consumers is grim in the second covid 19 wave and the company will wait and watch the impact on rural demand as the cases rise. Edited excerpts from an interview:

What is the impact of second covid 19 wave on consumption?

There are three elements to it. Supply chain disruptions, availability and consumption.

In the first wave, a lot of us across the sector took some time to settle down in terms of ensuring the supply chain disruption is sorted and making products available. There was a lot of panic and pantry loading especially in food then.

This wave is different. There’s absence of a centralized lockdown and you’re getting a phased kind of surge in states. Secondly, this time a lot of people have got impacted, and there is a little more fear. While the supply chain is stress-tested but because of people issues and the fact that grocery outlets are open for limited hours—the entire supply chain, and delivery system had to be re-tweaked.

We were the first companies to advise people to start working from home, including the salesforce. And we adequately stocked a lot of retail outlets. In food and essentials, we are not seeing any significant impact on consumption. But discretionary products or products linked to outdoors, will get impacted.

This time the mood is much worse. Last year a lot of people were experimenting with in-home cooking, there were a lot of premium indulgences they were buying. This year, because of the current situation, the mood is far more grim.

The other change we are seeing again is obviously a shift to local stores and e-commerce. Because of social distancing, travel, and other issues, organized retail is going to get impacted.

What was your share of business from modern trade and how much has it declined?

It's a minor decline—we had around 8-10% decline in modern trade last year, so maybe 1 or 2 percentage points. Most of it has moved to e-commerce, some to general trade. Things started improving in quarter three (for organized retail), the Q4 decline in modern trade is optical because last year base (in March’20) there was a lot of pantry loading which happened in modern trade.

What has also happened is that consumers have accelerated digital adoption. I can order through WhatsApp to my local kirana. So, I think, general trade and other ecosystem has seen a lot of digital adoption.

The pandemic has been around for more than a year. What permanent shifts in consumer behaviour are you expecting?

It’s my personal opinion, so, while memory is short, this time, after the second surge, it will take a long time for so-called optimism to come back. Consumers in India believe in destiny, we’re always over optimistic. We have a false sense of reality versus the future sometimes. But this optimism might get a little delayed. People talk about revenge consumption, but this is unlikely to happen, and people will be careful.

There'll be a far more focus on healthy living, healthy eating, avoiding co-morbidities. Maybe there'll be an increase in savings rate and higher penetration of things like insurance.

I think the happiness index will take some time to come back because the second surge has left a lot of people scarred. There'll be far more focus on mental health as an issue in organizations.

Has FMCG seen decline in April?

We had a very high growth momentum in the March quarter and that momentum continued. Maybe there was a little bit of—I would say not a slowdown in offtake or consumption—but there was some supply chain disruption, but we had a pretty comfortable April. I would say that this disruption is going to continue into May. In any disruption, the strong get stronger and the weak gets weaker. I believe that once things settle down, we'll come back to our run-rate hopefully by May end or June, unless this second surge gets significantly extended.

Last year rural markets were leading FMCG growth, will that momentum sustain?

I think (the spread) has gone into the next set of urban towns; we are not seeing it that much in rural, except in maybe one or two states. Rural India has had good monsoon, the crop has been good, there has been significant direct benefit transfers last year…so enough mechanisms unless there is a significant wave getting into rural areas. We have also expanded significant amount of distribution (in rural)—added 25% stockists in the previous year, we will continue to add.

So far, we are not seeing any risk.

But economists have flagged job losses in rural areas.

I think we have to wait and watch. The next three to four weeks are extremely crucial.

Marico’s foods portfolio crossed the 300 crore mark in FY21. What will drive future growth in the category?

We did a big shift in our foods portfolio last year. Instead of chasing niches and trying to create relevance and drive penetration, which is a long haul, we have shifted to looking at midsize categories, which have tailwinds and a single incumbent.

If we look at all the categories we have selected, they are categories which are at least 700-800 crore, which is basically $100 million plus, which have double-digit growth. A lot of them have a single incumbent with high market share and Saffola enters through a differentiated position. So, anything we do we should be able to ensure that we have a path to 100 crore in three years. As a 8,000 crore company if we launch something that doesn’t deliver 100 crore, it doesn’t move the needle as far as diversification of the portfolio is concerned.

We crossed 300 crore and we should be able to touch 450 crore plus. And then get into 850 crore plus kind of a number by 2024. Our aspiration, of course, is if we can do 1,000 crore, we will be extremely happy.

We have enough on the plate in foods. We have launched honey, chyawanprash, nuggets and just launched Oodles (noodles brands).

Will a fiscal stimulus be required this year?

This second covid wave would lead to some loss of jobs, incomes, and, therefore, I guess, some sort of support will obviously help. Certain sectors have again got impacted and I think, to an extent, we need to do it. We have to be careful about how to open up so that we prevent the third surge. So, a combination of a carefully calibrated opening up strategy, and accelerated vaccination is something which will work.

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ABOUT THE AUTHOR
Suneera Tandon
Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
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Published: 09 May 2021, 03:25 PM IST
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