FMCG or Fast Moving Consumer Goods are products that have a short shelf life and sold quickly at a relatively low cost. These are the products which are used by consumers in their daily life, for example, bread, meat, dairy products, soft drinks, etc.
FMCG sector is the fourth largest sector in the Indian economy. Another importance of this sector is that the health of the sector works as a quick indication of consumer sentiment and changing consumer preferences.
The impact of the pandemic on the sector varied by product categories. For example, Healthcare and Homecare sectors performed well while Grooming and Beverage were negatively impacted.
As the effects of the lockdowns subside, most categories show signs of recovery but the pandemic is leaving some systemic changes.
Similar to many sectors, the pandemic has quickened the speed of online sales. At the same time, opened up some novel distribution channels - food delivery apps and ride-sharing apps are being used for FMCG distribution.
If we talk about consumer sentiment, the consumers have become extremely value-oriented as evidenced by picking value packs over bulk packages.
As the consumers may be looking for ways to cut costs while maintaining quality of living, previously impulsive purchases may convert to discretionary. Packaging these impulsive purchase products with essential products may help in preserving the product categories.
2. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Executive Summary
● FMCG or Fast Moving Consumer Goods are products that have a short shelf life and sold quickly at a relatively low cost.
These are the products which are used by consumers in their daily life, for example, bread, meat, dairy products, soft drinks,
etc.
● FMCG sector is the fourth largest sector in the Indian economy. Another importance of this sector is that the health of the
sector works as a quick indication of consumer sentiment and changing consumer preferences.
● The impact of the pandemic on the sector varied by product categories. For example, Healthcare and Homecare sectors
performed well while Grooming and Beverage were negatively impacted.
● As the effects of the lockdowns subside, most categories show signs of recovery but the pandemic is leaving some systemic
changes.
● Similar to many sectors, the pandemic has quickened the speed of online sales. At the same time, opened up some novel
distribution channels - food delivery apps and ride sharing apps are being used for FMCG distribution.
● If we talk about consumer sentiment, the consumers have become extremely value-oriented as evidenced by picking value
packs over bulk packages.
● As the consumers may be looking for ways to cut costs while maintaining quality of living, previously impulsive purchases may
convert to discretionary. Packaging these impulsive purchase products with essential products may help in preserving the
product categories.
3. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
4. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Indian FMCG Sector
● FMCG is the fourth largest sector in the Indian economy and was expected to reach US $104 billion in FY 2020-21.
Data: IBEF
5. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Indian FMCG Sector: Urban/ Rural
● 55% of the FMCG market is in the Urban areas although the rural market is growing fast.
● Increasing awareness due to rapid smartphone and internet penetration along with improving physical connectivity
are contributing to the growth of the rural market.
Data: IBEF
6. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Indian FMCG Sector: Online Market
● The online market is growing rapidly and was expected to be US $45 billion by 2020.
Data: IBEF
7. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Indian FMCG Sector : Categories
● Household and personal care is the largest category representing ~50% and Healthcare represents ~31%.
Data: IBEF
8. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian Consumer Market
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
9. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Source: The World Bank
Population and Demography: Population
10. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Source: The World Bank
Population and Demography: Population Age-Groups
11. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Source: The World Bank
Population and Demography: Urban - Rural
12. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Data: RBI (at current prices, adjusted by average currency rate in respective years)
Indian Consumer Market: Purchasing Power
GDP: Gross Domestic Product
GNP: Gross National Product
NNI: Net National Income
PFCE: Private Final Consumption
Expenditure
GNDI: Gross National Disposable
Income (GNDI)
13. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Indian Consumer Market: Private Final Consumption Expenditure (PFCE)
Data: RBI
14. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Indian Consumer Market: Private Final Consumption Expenditure (PFCE)
Data: RBI (at current prices, adjusted by average currency rate in respective years)
15. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Indian Consumer Market: Private Final Consumption Expenditure (PFCE)
Data: RBI (at current prices, adjusted by average currency rate in respective years)
16. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Indian Consumer Market: Consumer Segments
Source: BCG, 2017
Elite: Annual Income more than $30.8 thousand, Affluent: Annual Income between $15.4 thousand and $30.8
thousand, Aspirers: Annual Income between $7.7 thousand and $15.4 thousand, Next Billion: Annual Income
between $2.3 thousand and $7.7 thousand, Strugglers: Annual Income less than $2.3 thousand.
17. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Indian Consumer Market: Consumer Segments: Share of Consumption
Source: BCG
Elite: Annual Income more than $30.8 thousand, Affluent: Annual Income between $15.4 thousand and $30.8
thousand, Aspirers: Annual Income between $7.7 thousand and $15.4 thousand, Next Billion: Annual Income
between $2.3 thousand and $7.7 thousand, Strugglers: Annual Income less than $2.3 thousand.
18. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Indian Consumer Market: Consumer Segments: Share of Consumption Expenditure by Location
Source: BCG
19. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Indian Consumer Market: Consumer Segments: Share of Consumption Expenditure by Family Structure
Source: BCG
20. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Policy
21. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Policy
Goods and Services Tax (GST)
● GST has simplified the FMCG logistics by removing various taxes with one.
● Apart from that, prices of commodities in the FMCG sector, like soaps, shampoo, detergents, biscuits,
savory snacks, etc. decreased after the implementation of GST, leading to a 3%-8% decrease in prices of
goods at modern retail stores. Most of the FMCG products come under the 18% tax bracket. Previously,
there was effectively a 23%-24% tax on them.
National Food Security Act, 2013
● The Act legally entitles up to 75% of the rural population and 50% of the urban population to receive
subsidized foodgrains under the Targeted Public Distribution System. About two-thirds of the population,
therefore, is covered under the Act to receive highly subsidized foodgrains.
● The act allowed the rural population to spend resources on other goods and services, including FMCG
products.
22. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Policy: Foreign Direct Investment (FDI)
Sector FDI Policy
Cash & Carry Wholesale Trading/Wholesale
Trading (including sourcing from MSEs)
Up to 100% FDI under the Automatic Route.
Single Brand product retail trading Up to 100% FDI under the Automatic Route.
Multi Brand Retail Trading Up to 51% under Government route.
Duty-Free Shops Up to 100% FDI under the Automatic Route.
E-commerce activities Up to 100% FDI under the Automatic Route.
23. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Impact of COVID19
24. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Impact of COVID19: Consumption
● Google mobility report shows that April was worst affected and slow recovery started after that. Grocery and
Pharmacy visits recovered quickly as they were deemed essential commodities, retail is experiencing a very
slow recovery.
25. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Impact of COVID19: Loss of Production
● The slowdown in the FMCG sector started before the COVID19 as seen from the year on year growth of
FMCG production in FY 2020. It is clear that the FMCG players were expecting a slow year.
● COVID19 deteriorates the situation.
Data: Care Ratings
26. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Impact of COVID19: Product Portfolio Management
● FMCG companies responded to the pandemic with quick portfolio prioritisation.
● This meant scaling down the production of some categories, scaling up production of some categories and
new product launches especially in the hygiene and healthcare category.
● Godrej Consumer Products launched 45 products in Q1 in the hygiene category - sanitisers and
handwashes.
● Dabur launched various products under the healthcare category - Honey with different herbs, Ashwagandha
products, drops, and syrups, etc.
27. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Impact of COVID19: New Distribution Channels
● Marico Ltd has launched the Saffola Store on Swiggy and Zomato.
● Uber launched last-mile delivery services partnering with BigBasket.
● ITC collaborated with Domino’s Pizza to deliver essential items.
● Godrej Consumer partnered with Zomato, ShopKirana, Zoomcar for delivery of essential items.
28. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Impact of COVID19: Financial Impact
● The effect of COVID19 on the FMCG companies depended on their product portfolio. HUL for example
experienced growth in both revenue and PAT in Q1 FY 2020-21.
Source: Dabur, Godrej and HUL
29. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Impact of COVID19: Financial Impact
● For HUL, Food and Refreshment segment, which contains ‘in-home’ consumption foods, beverages,
nutrition drinks, etc. experienced healthy growth. The grooming segment was impacted negatively.
Source: HUL
30. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Impact of COVID19: Financial Impact
● On the other hand, Dabur experienced a severe negative impact on the Food segment which comprised
primarily packaged juices.
Source: Dabur
31. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Future of FMCG in India
32. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Indian
FMCG
Sector
Distribution
Consumer
Behaviour
Packaging
Pricing
33. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Future of FMCG in India: Consumer Behaviour
● EY : 60% of Indian consumers believe that the way they shop would change as a result of COVID19.
● New consumer segments are emerging based on how they are coping with the short, medium, and long
term challenges.
34. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Future of FMCG in India: Consumer Behaviour
● Kantar : Light buyers are affected the most.
35. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Future of FMCG in India: Consumer Behaviour: Recovery
● Kantar : Healthy growth in FMCG volume except for beverages. Grooming underperformed during the Q1 of
FY 2020-21 but recovered post lockdown.
36. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Future of FMCG in India: Consumer Behaviour: Recovery
● Kantar : Recovery widely varies by category.
37. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Future of FMCG in India: Distribution
● Kantar : 50% growth in households buying FMCG online. New categories which consumers are buying
online are Edible Oils, Tea, Atta, Salt, Toothpaste, Spices, Noodles, Sanitisers, Dish Wash and Skin Cream.
38. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Future of FMCG in India: Distribution
● online purchase and home delivery of FMCG products became popular during the lockdowns.
● The direct delivery of FMCG products may gain traction and replace other channels in the future.
● Also, e-commerce is becoming more and more important for FMCG players. Some players may also push
for more innovative channels such as Social Commerce.
● The reverse migration that India witnessed means that demand for FMCG products likely to increase in the
rural areas as people migrating from the urban areas who are already habituated with the urban lifestyle will
demand similar products in the rural areas. FMCG players need to focus on distribution channels for rural
areas.
● Increased frugality may turn consumers hesitant in purchasing previously impulsive purchases. Subscription
offers through the home delivery channels may prove to be helpful in repeat sales.
39. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Future of FMCG in India: Packaging
● FMCG players need to ensure packaging gives the perception of hygiene consciousness. Fear of infection is
going to stay with us for at least some years.
● At the same time, ss consumers turn frugal, they sigh away from bulk packages and pick value packs.
● The FMCG players need to change their packaging strategy based on rapidly changing consumer
sentiments.
● As the consumers may be looking for ways to cut costs while maintaining quality of living, previously
impulsive purchases may convert to discretionary. Packaging these impulsive purchase products with
essential products may help in preserving the product categories.
40. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Indian FMCG Sector Indian Consumer Market Impact of COVID19 Future of FMCG in IndiaPolicy
Future of FMCG in India: Pricing
● Pricing will become more and more challenging in the coming quarters.
● Financial stress is likely to make consumers frugal and ration their spending.
● The effect of this financial conservativeness likely to be very varied based on category - expected to be less
for healthcare, hygiene products but higher for discretionary products.
● Significant uncertainty about consumer behavior post-COVID means FMCG players need to track consumer
behavior intimately so that they can react quickly and set pricing accordingly.
41. Impact of COVID-19 on Indian FMCG Sector by Sam Ghosh 23rd September 2020
Thank You