FMCG cos bet big on ecommerce, eye online-exclusive product launches

A major change in consumer behaviour that emerged through the COVID-19 pandemic has been that of consumers turning online to buy their groceries and daily needs. As a result of this, ecommerce sales of FMCG companies have surged in the last two quarters and these forms are cashing in on this trend with exclusive ecommerce launches.

Market research firm Nielsen said in its recent report that ecommerce consumption levels are now higher than pre COVID times. For the FMCG industry, ecommerce contributed 2.8 percent to sales in the October-December quarter as against 0.5 percent  in the July-September quarter, with the growth spurt being led by metros. This increasing trend has also led to large conglomerates such as the Tata Group and Reliance Industries Ltd to shift focus on online grocery.

FMCG companies too, on their part are upping the ante in the space. Companies such as Dabur, Marico, Hindustan Unilever Ltd (HUL) have been launching products exclusively on ecommerce platforms. Some companies are also using ecommerce platforms as a test pilot for several new products before extending them offline.

FMCG industry grew 7.3% in December quarter, smaller companies fared better than large players

FMCG major Marico, in the last two quarters, saw contribution from ecommerce to sales increase to 8 percent from around 5 percent a year ago. The company has even set up separate business unit to handle digital brands.

"We are invested ahead of the curve in ecommerce, which contributes 8 percent to our revenues. Obviously in ecommerce, our product mix has to be far more towards digital brands or I would say digital premium brands," Saugata Gupta, managing director of Marico said during the company’s Q3 investor call. Most recently, the company also forayed into the instant noodles segment with the launch of Saffola Oodles, which is again being launched exclusively online first.

Also read: Marico forays into instant noodles space, launches ‘Saffola Oodles’

"We were able to capture the increasing preference for online purchases among consumers and increase the market shares on ecommerce platform. We have also launched ecommerce first innovations like Baby Care portfolio, Apple Cider Vinegar and Cold Pressed Mustard Oil which are receiving a good response. So we see ecommerce structurally becoming bigger as channel where the consumers are inclined to do their purchases as a contactless purchase behavior," Mohit Malhotra, chief executive officer of Dabur said during the earnings call for Q3.

HUL, on the other hand, saw its ecommerce sales double in Q2 and Q3 on a year-on-year basis. In the December-end quarter of 2019, the company said ecommerce contributed to 2-3 percent of its revenues, which would mean that ecommerce now contributes around 6 percent to HUL’s revenues.

HUL expects this growth to stick, and is also dialling up investment on the ecommerce front. "We have a strong portfolio of products with the right pack price architecture, exclusively designed for e-commerce. Surf Excel Matic value pack offers value to the consumers and is economically viable from a last-mile delivery perspective. We are seeding e-comm first brands like Nature Protect. We are bringing premium offerings like hair masks and serums, which form part of the haircare regime of consumers who shop on this channel," Sanjiv Mehta, chairman of HUL said.

Also read: Indian retailer group calls for ban on Amazon in country after Reuters report

Biscuits and confectionary maker Parle is observing a similar trend as well. It saw ecommerce contribution to sales increase three times in the past nine months. For Parle, ecommerce now contributes to over 6 percent of its sales as against 1.9 percent a year ago. Parle too, has launched online exclusive products across categories. Krishnarao Buddha, senior category head - marketing, Parle Products said products that were launched exclusively online saw 100-200 percent growth.

Other FMCG majors such as Britannia and Nestle too, saw their ecommerce sales double over the past two quarters, as compared to the same period a year-ago. "Ecommerce is at just about a 1 percent contribution as far as ecommerce is concerned but growths there are phenomenal. It used to be about 0.5 percent of our total business. It's now at about one percent," Varun Berry, managing director of Britannia said.

Swiss food and beverage major Nestle saw a 111 percent growth for the whole of 2020, with ecommerce now contributing to nearly 4 percent of its revenues, up from 1.9 percent in 2019.

Also read: Haldiram's forays into healthy food, launches range of nutritional food products

With a large number of people still working from home, FMCG companies expect this trend to continue, with ecommerce becoming an increasingly important avenue of sales for FMCG majors.