The emphasis of FMCG spending in India is changing, while the willingness of Indian consumers to spend on luxury and entertainment will be limited by financial and safety factors, according to the fifth edition of Nielsen’s COVID-19 Evolving Consumer Trends report. 

The data show that the Indian FMCG industry has been hit hard by the severity of the pandemic. With India coming out of lockdown phase, non-essential commodities have shown a restrained revival and are still to reach pre-COVID levels. That said, FMCG has recovered quickly due to the pent-up demand in June-July and is stabilising now, driven mostly by rural India.

This is now now driving the “strategic priorities” of FMCG companies, according to Nielsen, and they are now increasing focus on the villages which retail close to 40% of industry sales for the next six months.

For groceries and home solutions, consumers prefer mass and popular price segment products and bigger packs that offer good value proposition and are scouting for deals and promotions, the data and measurement firm says. Grocery store shelves are getting optimised as the number of assortments for each category is reducing.

E-commerce is seeing a cautious recovery with an increased number of first-time shoppers as more consumers adopt online shopping, though it currently accounts for just 3% of total FMCG sales. The average spend per shopper, order value and number of items purchased has increased even as consumers are either downgrading to more affordable offerings or shifting towards value-for-money large packs as the pandemic and ensuing lockdowns leave many households cash strapped. 

“When we consider India within this framework, we see clear evidence of the basket reset, weighted by the affordability reset. The tension in the consumer basket is that they are trying to reconcile the old needs with the new ones; the health/hygiene and product value proposition competing with each other,” explained Diptanshu Ray, Lead, Retail Intelligence, South Asia, Nielsen Global Connect, in comments reported by Financial Express.

In a survey conducted by the research firm among chief experience officers (CXOs), 64% of respondents were optimistic about business performance in the next four months while 29% expect a decline of between 5% and 15%. Limited store opening hours and a decline in consumer demand continue to be a challenge for businesses. (In July, Nielsen had revised its outlook for branded FMCG industry in India, expecting the year to be flat, with growth in the -1% to 1% range.)

CXOs are adapting to the ‘new normal’ consumers by increasing their investment in digital and online platforms as more and more consumers are adopting e-commerce. About half of the surveyed CXOs are also reviewing their communication strategy to convey safety, health and hygiene and reducing advertising campaign spends.

Sourced from ETBrandEquity, Financial Express