Lockdown hits FMCG growth

A sharp decline in FMCG sales across verticles, a major slump in most retail cycles and an uptick in hygiene products have been seen in the course of the nationwide lockdown. These data sets were the key highlights of a report by market researcher Nielsen on the impact of COVID-19 on the FMCG sector. The report noted this decline during the last week of March after the FMCG goods had witnessed double-digit growth during the first three weeks of the month.

A survey with top industry leaders conducted by Nielsen pointed out that supply chain and mobility issues have emerged as the biggest industry concerns in the FMCG and retail space, followed by production capacity shortage and sourcing of raw material. These factors, according to the market researcher were the main factors that contributed to a slump in sales.

In terms of retail channels, almost all retail verticles bore the brunt of the nationwide lockdown.

"We saw some bits of pantry loading in the first few weeks of March. Challenges on the replenishment front resulted in the out of stock situation post-implementation of the lockdown," Sameer Shukla, West market leader, Nielsen Global Connect, South Asia, said.

The report said that traditional trade, e-commerce and cash and carry have seen a sharp fall in the last week of March, while modern trade was an outlier posting 6% growth in the last week of March. While e-commerce saw a 64% fall in growth in the same time period, growth in cash and carry trade fell 44%, with traditional trade falling 6%.

The report said that eight out of 10 retailers faced supply and out of stock challenges. Around 15% of consumers found grocery and essentials out of stock and 22% found salty snacks and ready to eat foods out of stock.

Small players plugged the huge demand-supply gap in hand sanitiser and packaged rice category. The report said that new entrants and smaller brands are now dominating the hand sanitiser market, a segment that has witnessed a multi-fold surge in sales post the pandemic. In fact, the report said that the hand sanitisers category witnessed a growth of 340% in overall trade and leading brands in these categories were not able to cater to the surging demand. Similarly, demand for immunity products such as Chywanprash branded honey, and turmeric shot up in modern trade stores in March reflecting a consumer preference for healthcare and personal hygiene products.

"In the sanitiser category, we found a whopping 152 new players entering the market in March contributing to 46% of category sales in March. This indicates that availability and quality of the product are more important over brand choice where supply mechanism is severely compromised,” said Nielsen.

Another interesting finding the report threw up was a possible cut in discretionary items such as eating out, theatre visits, luxury brand purchase and so on by urban consumers, post the lockdown. The report said that in an online survey of 1,330 respondents, a whopping 64% said that they intend to spend less on restaurant and movie theatre visits. 54% said they will decrease spends on automobiles, luxury brands and leisure travel.

This according to Shukla is a result of consumers becoming more cautious due to the COVID-19 pandemic. " They will be bearish on discretionary spends once normalcy is restored. The focus of their spends will be more on health and hygiene products with financial security expected to drive behavioural shifts. At the same time, technology will be a key catalyst for convenient and enhanced consumer experience.”

Despite the supply chain issues that most platforms faced in the initial days of the lockdown, Nielsen says that e-commerce will see a huge upsurge in demand, going forward. “Nearly 57% of corporate leaders talked about more focus on e-commerce channel as the top priority in the next 12 months,” Nielsen added.