FMCG consumers opting for affordable price points, large packs: Nielsen report

Meenakshi Verma Ambwani New Delhi | Updated on September 25, 2020

FMCG consumption was hardest hit in bigger cities during the lockdown   -  THE HINDU

Rural markets, smaller towns driving sales

Rural regions and smaller towns are driving FMCG sector’s growth amid the Covid-19 pandemic, which has also skewed consumer purchases towards more affordable price points and large packs as they remain cautious spenders. FMCG companies have also stepped up on innovations in the health and hygiene and home-cooking product segments to meet evolving consumer demands, according to a Nielsen report.

“FMCG consumption was the hardest hit in bigger cities in India during the lockdown period, the impact was the least in our villages that retail close to 40 per cent of industry sales,” according to the Nielsen report on evolving consumer trends. The markets and research insights firm pointed out that “middle and rural India” is driving strategic priorities of FMCG companies. Majority of CXOs surveyed by Nielsen in September said they are increasing focus on middle India and rural markets over the next six months. Middle India refers to towns with upto 10 lakh population.

Sameer Shukla, Executive Director, Retail Intelligence, South Asia, Nielsen Global Connect, said the rural regions have performed better in terms of growth over last year as compared to urban regions and are witnessing strong tailwinds due to factors such as good monsoons and government’s policy actions.

Affordable price points

With shrinking wallets, consumers are opting for “mass and popular priced offerings or “value for money large packs”. This was visible in various categories such as blended spices, noodles, detergent cakes, washing powders and packaged tea. Nearly 36 per cent of the FMCG CXOs surveyed said they are increasing focus on mass and popular priced offerings while 43 per cent said they are stepping up focus on large packs

Focus on innovation

With nearly 1897 new launches in the health and hygiene space in the March-August period, FMCG companies are clearly sharpening their focus on innovations in relevant segments to meet evolving consumer needs. “We have seen a significant increase in the number of players entering the health & hygiene basket with categories such as hand sanitisers, hand washes, and antiseptic liquids. Similarly, in-home cooking basket is gaining prominence and is witnessing increased innovation in the market,” the report added.

Meanwhile, retailers are also optimising product assortments by operating with fewer items to focus investment and shelf space on fast moving items. Categories such as salty snacks, biscuits, noodles, chocolates, shampoos and toilet soaps witnessed a reduction of 10-15 per cent in terms of average number of SKUs or items stocked per store. This strategy of assortment rationalisation was echoed by the FMCG industry leaders with 36 per cent CXOs saying they plan to rationalise consumer offerings in the next six months.

E-commerce channel

Acceleration in adoption of the e-commerce channel due to the pandemic has led to rise in first time buyers even in the FMCG segment. “There is a steady adoption for FMCG online with first time shoppers increasing month on month to 36 per cent. The consumer spends and basket sizes are continuing to expand online,” the report added. As the FMCG industry is seeing a cautious recovery, e-commerce channel, with a small base (3 per cent of total FMCG sales), has shown resilience against the tough times, Nielsen added.

Published on September 25, 2020

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