Structural Shifts in the Consumer Goods Sector – Trends and Outlook
India’s consumer goods industry is at an inflection point. The heterogeneity and diversity in the Indian CPG market are challenging and recent structural changes are creating tectonic shifts in market dynamics. This blog is an attempt to put the spotlight on the changing paradigms in the industry and the imperatives for CPG companies.
FMCG sector is the fourth largest sector in India. Consumer spending in India is likely to reach US $3.6 trillion in FY’22 with semi-urban and rural markets accounting for 44% of the market.
The changes in consumer behaviours accelerated by the pandemic are posing new challenges and opportunities that CPG sector leaders are planning to address.
‘Millennials and Gen Zs’ is the most important cluster of ‘target customers’ for brands. E-commerce, social commerce, community commerce, D2C, etc. are becoming preferred channels for outreach.
Another important visible trend is the significant increase in the demand for branded products in rural India, with increasing rural consumer awareness. Access to information and services and outreach activities by FMCG companies are contributing to this scenario.
Supply chains are being redrawn and are driven by outcomes delivered through value-chain optimizations—seamless connectivity with ecosystem players like suppliers, distributors, retailers, and end consumers.
Last but not the least, Environment, Social, and Governance (ESG) is becoming a critical theme to Corporate Social Responsibility (CSR), and consumers are taking a serious look at what brands stand for before they buy.
Direct to Consumer
Direct-to-Consumer [D2C] involves selling directly to the end customers via company’s own e-commerce platforms or through marketplaces. The benefits of a D2C business model are many— streamlined sales, reduced overheads, better traceability, and engaging consumer experiences while getting valuable customer insights. Companies are building immersive D2C platforms, enabling integrated fulfilment and assortment planning while managing partners (3PL, trading partners, etc.).
Omni-channel Fulfilment
Seamless omnichannel customer experiences require unified and collaborative efforts across channels. End-to-end visibility of transactions from purchase to delivery, including inventory management, order management, shipping and after sales service management, is paramount.
E-commerce Fulfilment Automation
During FY’21, e-commerce business contributed 5% – 10% of FMCG sector leaders’ sales, accelerated by the pandemic. Many companies are targeting to grow this to 15-25% over three years. But challenges abound. Selling products through e-commerce platforms, multiple brand websites, and marketplaces are complicating order fulfilment processes and impacting fill rates.
General Trade Route-to-market Acceleration
Digitizing general trade channel continues to be a key area of focus for most CPG companies as the channel contributes nearly 80% of revenues even today. Most companies have invested in modernization, be it ‘last-mile connectivity’, ‘apps for retailers’, ‘direct retailer orders’, ‘salespersons route optimization’ etc. Data analytics and advanced technologies to run algorithms and geo-fencing using sensors and imagery are some solutions that deliver better market coverage and sales effectiveness.
Tackling Supply Chain Transformations
With an increasing number of ‘routes to market, sales channels, SKUs growth’, supply channels for CPG companies today are more complex than ever. Managing demand and supply planning, inventory and capacity planning and warehouse operations, tracking shipment, and inventories in real-time is challenging, to say the least.
With digital platforms and tools, frameworks and solutions that are using AI/ ML and data analytics tools, digital supply chains today are both resilient and intelligent!
India’s rural economy has come into the reckoning during and post-pandemic—and so has the rural consumer. Companies are trying to aggressively engage with the rural customer who is much better connected today. Hi speed internet connectivity, significant uptick in data consumption, panchayats getting digitally connected have enabled CPG companies to tap into new class of customers.
Conclusion
Today companies are adopting a learn-on-the-go model towards transformation. Technology, more than an enabler, has become central to business strategies. It is imperative for organizations to look to strategic partnerships with technology companies to bring in scale and co-create the future. This calls for the identification of priority areas, defining of themes and use cases relevant to business, and creation of roadmaps for transformation with clear ROIs.
About the Authors
Ashish Sharma, India Business Head – Manufacturing, Consumer & Technology at Wipro, is a corporate intrapreneur and has successfully established New Sales Geographies & launched new products in the marketplace.
Sujit Jagirdar, Practice Partner, Global Consumer Goods Domain & Consulting Group at Wipro, has over two decades of IT Industry experience in Global Delivery and Program Management.
Kalpesh Bhaviskar, Senior Consultant, Consumer Goods – Domain & Consulting at Wipro, has a 6+ year-strong experience of business processes in the Indian CPG industry.
