According to market research firm Nielsen, FMCG companies are now focusing on the middle and rural India. These areas have quickly recovered and bounced back to pre-COVID-19 level and they are driving the strategic priorities for the FMCG companies.
Nielsen is defining middle India as urban but towns with a population of one to ten lakh, excluding rural centers and metros.
What does the Report from Nielson reveal?
According to the fifth edition of its FMCG forecast COVID-19, Evolving consumer trends the FMCG companies are now increasing focus on the villages. These have retail close to 40 percent of industry sales and have the least impact of the pandemic.
FMCG consumption was hit the hardest in bigger cities in India during the lockdown period. The bigger cities are seeing a cautious recovery in the country.
The report also stated that the contribution of smaller towns is also rising in the e-commerce channels. They have made rapid gains after showing better recovery against the tougher times during the lockdown.
As was seen in the analytics solutions of e-commerce channels, the same phenomenon is also reflecting in different sectors beyond FMCG. There is a contribution increase of lower town classes to overall e-commerce. This is in the period of May to August this year.
The research firm further reported that the consumers are either downgrading to more affordable offerings or shifting towards value-for-money large packs. This is because the pandemic and the ensuing lockdowns left many households cash strapped.
The report also stated that the share of private labels of the retailers is going up in modern trade. Manufacturers and retailers on the other hand are taking guidance from consumer perception and behavior in the pandemic. They are strategizing to adapt to the cautious revival of the industry.
The regional areas performing better than the bigger areas during the COVID period are hinting at affordability reset in the game.
The firm further said that in addition to this, there is also the prioritization of items by manufacturers and retailers. This is leading to an optimized store shelf. Retailers are rationalizing assortment by operating with fewer items to focus on investment and shelf space on fast-moving items.
FMCG gearing up for the upcoming festive season
According to Nielsen, the upcoming festive season sales might help get a boost from pent-up demand from lockdown. The shoppers today are anticipating and holding back their purchases for sale periods. Although some categories such as home appliances are seeing a pent-up demand. This is because of safety and personal home convenience. The festive season will see a big release of this pent-up demand with e-commerce players gearing up for the upcoming sale season. E-commerce contributes to around three percent of the total FMCG sales.