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How small FMCG players can thrive post Covid-19.

Updated: May 31, 2020

A large part of the discourse in the FMCG space so far has been around essentials. It goes on to indicate that small players are likely to get wiped out due to drop in demand. A look at the stock market tells you that the big players such as Unilever have been backed to come out as winners post this crisis. The odds are stacked against the smaller players owing to concerns around maintaining healthy cash flows. Industry leaders are worried about survival and have put their entire focus on surviving today, what’s probably missing is a look at the plan for tomorrow.

Covid-19 is a Black Swan event, and Black swan events are known to throw the established marketing principles out of the window. The lock-down has broken the supply chain and hence distribution. As an FMCG marketer I have often found distribution to be unfavorable to new products. For new products the opportunity hence lies in the removal of that one unfavorable factor.

It must be highlighted at this point that FMCG products largely tend to be similar to each other in terms of the basic product attributes, it is hence that the brand and availability significantly impact the purchase decision. Imagine this, if you have to brush your teeth, would you delay the process because your favorite brand of tooth-paste isn’t available at a nearby store? Probably not.

Broadly classifying, new products either come in the form of a premium price offering with value added benefit or at in the form of a low cost offering. Let’s look at the latter first. FMCG majors such at ITC and Unilever thrive in ensuring their products are available at most consumer touch points, more often and, in larger quantity than their competition. Their large volume also ensures that have massive manufacturing units which give them the best economies of scale. When the lock down came into place and state borders were sealed.It ensured that goods can no longer be moved from a large manufacturing facility in one state to be distributed across the country. Hence the economies of scale and distribution reach are no longer parameters to compete upon. This significantly levels the playing field.Hence opening up an opportunity for regional players to gain market share in the mass FMCG categories.

Leaders in the mass FMCG marketing segments, besides working on surviving today, need to focus on these opportunities of the future.

1) Faster Go-To-market of new innovations customized to their consumers

2) Ensuring that they continue to work with trade partners using nimble channel policies. Large organizations are traditionally notorious for taking a long time in making decisions.

3) Small Organizations especially Entrepreneurs can make decisions that managers can’t.

Now I do understand that, the most popular new products or new organizations off late have come up in the more premium or at least urban markets so let’s look at the opportunities available there.

Leaders in the premium FMCG segment need to focus on E-commerce to be able to come out of the crisis with a larger market share than before. In marketing terms this would mean, investing in digital marketing and in bottom-of-the-funnel marketing on E-com platforms. Discerning Urban consumers may stall demand for a certain period of time but they will definitely come back once the crisis is over.

The E-commerce Industry in China for example has quoted a 33% increase in sales volume as compared to the same quarter last year, without any increase in number of sellers. This indicates that multiple points of distribution would not be needed but in fact there would be growth coming from increase in offtake from the same touch-points.

Another big input to back this development is the Indian govt. initiative to launch 20 lac “Suraksha stores” across the country. India as a nation has about 11-13 Mn retail outlets. It’s impossible for small players to be able to be present across such a large number of stores within a short span of time. What the launch of “Suraksha stores” would ensure is that while the demand may drop slightly at an overall level, it will get hyper focused onto these 2Mn outlets. This is where the opportunity lies for smaller players.

This coronavirus crisis is actually a leveler for consumer marketing organizations. The lock-down period is sufficient to significantly alter consumer behavior. The decades of knowledge gathered by large firms might actually become a hindrance to unlearn and learn the new business as usual. It is imperative that we look at it from the lens of an opportunity.The best insight, the best product and the best brand, in this new reality will win in the long run.

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