PremiumNew Delhi: With an eye on driving profitability in the e-commerce channel, large, packaged goods companies said they are ensuring assortments offered online are niche, premium and differentiated with plum margins compared to what they sell via general trade, that is, the local neighbourhood stores.
Packaged consumer goods makers have seen their share of e-commerce grow over the last year as a consequence of the pandemic. E-commerce contribution to FMCG sales in the country’s top 52 cities reached a double-digit mark in the month of May 2021, researcher NielsenIQ said. This has led FMCG firms to focus more on the stock keeping units and brands that work well online.
For Marico Ltd., e-commerce hit 9% in the June quarter. While it has invested in two direct-to-consumer brands—Just Herbs and Beardo – besides selling its own popular brands online, the company has more work to do in assembling assembling a more premium portfolio for the internet. “Look we cannot just sell Parachute and Saffola in e-commerce," Saugata Gupta, managing director and CEO, Marico Limited said. “I think there is a huge journey to be done in premiumization. We have got our act right on foods for e-commerce. But in personal care premiumization, we still have our job to do," he said.
In the offing could be combination of premium value-added hair oils or male grooming serums, skin care brands and direct-to-consumer brands fit for launches online, he explained. Gupta added it was “very critical" that all trade channels have varied assortments, “which is incremental and not cannibalistic". “The other thing we are doing is that we are ensuring that long term, there is uniformity in cost to serve across all channels so that independent of the growth of a particular channel your overall margins are more or less in line," he said.
Earlier this month Mumbai-based Godrej Consumer Products Ltd (GCPL) rolled out more premium products on e-commerce. This includes Godrej Ezee Detergent Pods, Godrej Protekt All-in-1 Dishwasher Tablets as well as Goodknight Anti Mosquito Bed Nets in what the company said are digital-first brands. In an interview, Sunil Kataria, CEO, India & SAARC at GCPL said he doesn’t envision e-commerce to be a channel which ends up discounting versus other channels.
“The game here is picking stock keeping units among your core brands which actually have high gross margins... Similarly, when we are launching many of these growth brands or these e-commerce brands, they are also on the premium side," he said. “We want to make sure that our e-commerce channel throughput is by and large (in line) with our general trade and modern trade channel throughput," he added.
Hector Beverages, the maker of traditional Indian beverages under the Paper Boat brand, said it is launching "online first" or "digitally native" products, which retail only online and not via general trade. "These are generally long tail products which have niche demand and in general trade it is very difficult to distribute," said Neeraj Kakkar, CEO at the beverage company.
Dabur India, too, said it will continue to use e-commerce as a launchpad for new brands. “With e-commerce emerging as the most-preferred contactless method of making purchases in the post-covid world, its saliency has grown to 6% now from around 2% a year back. With mobility improving, shopping behaviour would witness rebalancing in the current quarter," Mohit Malhotra, the company’s chief executive officer said.
The coming months will see a number of new product and format innovations across Dabur’s power brands – such as Dabur Honey, Dabur Lal Tail, Honitus and Vatika -- being rolled out in e-commerce, Malhotra said
“We will continue to look at e-commerce as the innovation cradle for our Power Brands. We will use e-commerce as the launch platform for many of these new-age formats, build up scale here and then roll them out in other channels," he added.
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