COVID-19 compels Food & Grocery Industry to re-imagine innovation

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It’s been exactly one year since the first Coronavirus case was reported in China, yet the pandemic continues to impact both industries and consumers across the world at an unprecedented scale. Just like other industries, the Fast Moving Consumer Goods segment has been no exception to this reality and has witnessed significant disruption over the past year.
Over the last few months, the behaviour of consumers across the world has changed dramatically and they are still evolving, continually developing newer habits. The present day consumer has developed a slew of new concerns ranging from health and well-being, availability of essentials like food and cleaning products, to how their life would be altered over the long-term. Experts believe that the impact of the pandemic is bound to alter all aspects of a consumer’s life. But while some areas would witness temporary effects where habits change for short duration and then go back to pre-COVID-19 ways, other areas would face long-term consequences.
These changes in consumer behaviour, be it short-term or long-term, do impact characteristics of products consumers buy, dynamics of product categories and operations of product companies. For example, the short term changes in consumer behaviour were apparent in the sudden shift in demand for product categories. After the pandemic hit, healthy food products that promise vitamins, minerals and other healthy immunity boosting ingredients witnessed a sudden surge in demand. On the other hand, demand for more discretionary categories, such as non-essential personal care like beauty and make-up, large ticket consumer durables and appliances as well as on- premise consumption of alcohol and carbonated beverages has been impacted, according to a Ernst & Young report titled COVID-19 and Emergence of a New Consumer Products Landscape in India’.
In the wake of this change in consumer behavior and lifestyle, businesses operating in the FMCG industry are compelled to streamlined their brand portfolio, and continually innovate in all aspects of their operations – right from product development, in-store services to marketing strategies to appeal to consumers who have now become more discerning than ever before.
In its report titled ‘Reimagining Consumer-Goods Innovation for the Next Normal’, McKinsey & Company highlights how the COVID-19 pandemic has compelled CPG manufacturers to reimagine their innovation portfolios to lead in the next normal. Among other factors the report outlines consumer behaviors are particularly germane to the innovation agenda.
Consumers around the world are trying out new products and the onus lies on brands and retailers to understand the specific requirements of their TG and serve them accordingly. According to the report, CPG companies and retailers that accommodate changing consumer behaviors as such will probably emerge from the crisis stronger, putting pressure on competitors to keep pace.
At the same time, there has also been a resurgence of larger brands. Globally, consumers are shifting to ‘brands that consumers can absolutely trust’. The report highlights that about 77 percent of consumers in India have switched choices to ‘trustworthy brands’ during the pandemic. This provides businesses to innovate and come up with redesigned branded products could have an opportunity to deliver more value.
Shift to Digital Retail
One of the more clear outcomes of the pandemic is the abrupt shift to digital retail. Social distancing has accelerated adoption of e-commerce and consumers will continue to embrace digital platforms for a variety of needs in the years to come. This is apparent because even after lockdown restrictions were lifted, digital engagement has continued to remain high, with ~80 percent of consumers reporting safe, easy, and convenient experiences in DTC channels. This stands as a testimony to the utter importance of personalization, the right social-media and mobile presence, and the right marketing message for businesses to ensure growth.
A recent Deloitte Consumer tracker survey sees an increasing trend towards BOPIS (buy online pickup in-store), apart from the increase in pure play online purchase and delivery. The primary reason for this centers around safety, as also ability to browse through the entire assortment more efficiently, at their convenience and in the comfort of their home.
FMCG Brands: Reconceive Innovation
As lockdowns are lifted and the consumer starts returning to public spaces, the big question for businesses in the FMCG industry is how to deliver new and powerful experiences?
According to the aforementioned McKinsey & Company report, single-serve needs, at-home consumption, evolved shopping missions, and growing private-label competition will all dictate the new pipeline priorities. The report also suggests that indispensable need for businesses to renovate the core using recent trials as a springboard. Using these trials, brands can get a hang of the consumer base they can target for repeat and loyal purchases, as well as analyze satisfaction rates, and price/value considerations that can potentially drive the overall net present value.

  • commerce has emerged a unanimous winner amidst the whole pandemic and the whole shift to digital commerce is expected to persist even post the pandemic. As stated in the Ernst & Young report mentioned above, it is imperative for companies to have a consistent presence online and offline. Today it has become indispensable for both brands and retailers to not only have solid e-commerce capabilities but also extend their relationships with third-party e-commerce platforms. This provides them with immense opportunities to collaborate in new ways such as deeper data exchange or shared warehousing. Going forward, the ability of companies to digitize fast, optimize the use of data analytics and improve customer experience will be the biggest differentiator in the industry.

Over the past few months, the Indian FMCG industry has also been witnessing innovative tie-ups by businesses in a bid to reach out to customers better. Marico Ltd. has tied up with Swiggy and Zomato to launch Saffola Store; Uber India has tied up with BigBasket to facilitate last mile delivery service; ITC has partnered with Dominos for delivering essentials, and the list goes on.
As supply chains progressively challenged due to COVID-19 precautions, the relevance of DTC (direct-to-consumer) channels have found unmatched relevance in the last few months. According to Nicole Corbett, Nielsen Director of Intelligence, “As shopping behaviour stabilizes post COVID-19, many consumers are likely to continue to embrace manufacturer-direct technology solutions. This represents an ongoing opportunity for big and small manufacturers to assess not only their engagement platforms, but also their sales channels.”
Thus, the urgent need for accelerating DTC evaluation and testing is apparent for all players of this industry. Every catastrophe gives birth to generation-altering innovations and the COVID-19 pandemic is no exception. Over the last few months, the FMCG industry across the world has been replete with examples of businesses shifting to DTC’s full omnichannel value (sales, insights, testing); embracing a distinctive value proposition; focus deeply, from day one, on unit economics; and get ahead of the operating model and tech stack early to support scale if it can be reached.
Moreover, FMCG sales and distribution in India was long overdue for a facelift. The current sales and distribution system and structure have become a moat for the big brands and as long as the competitive brands continue to operate with this sales and distribution structure and system, they will find it extremely difficult to leverage on the growing consumer franchise for their brands. It’s high time they start re-engineering their sales and distribution systems to maximise on the market opportunity.
Technology Adoption
The silver lining of the Coronavirus pandemic for the retail industry worldwide is that it highlighted the limitations of the traditional way of doing business. The result was an accelerated rate of technology adoption by businesses across spectrums. The Indian FMCG industry was no exception and businesses are increasingly opting for tech based solutions to mitigate the pressing concerns in their innovation procedures that the COVID-19 pandemic has highlighted.
Modern technology can help businesses in a plethora of ways – right from improving processes to bolster market reach, increasing monitoring capabilities to increasing demand capturing capabilities and drive productivity while lowering costs.
Nielsen data shows that more than half (51%) of global consumers are willing to try AR/VR to assess products and services. With consumers still hesitant to go out to stores, the onus is upon brands and retailers to offer them alternative entertainment and shopping experiences. Businesses that can leverage AR/VR may hold the answer to immersive augmented reality experiences that will transform engagement and shopping in the near future.
Today major FMCG brands are banking on a slew of modern technology like Sales Force Automation, Distribution Management System, Warehouse Management System, Delivery Management System and other intelligent tools to improve sales, delivery and in-outlet executions.
The COVID-19 situation is still evolving, and what the future beholds is a question that only time can answer. But what is certain is that the pandemic has changed the face of FMCG retailing forever to come. The pace of evolution of the future consumer will be advanced by years and in line with it businesses will have to innovate both in products and process transformation with new and emerging technology.
How Technology Can Help FMCG Businesses

  • Get better understanding of consumer
  • Better TG targeting
  • Enhance market reach
  • Bring Down the cost of order capturing
  • Boost sales efficacy through AI-enabled intelligence
  • Even off the supply chain seamlessly
  • Increase their customer base
  • Dramatically reduce the time-to-market
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