Mumbai: At the onset of 2022, with two years of covid rocking everyone’s boat like crazy, all were anticipating that 2022 would bring some relief. But life had other plans—the year kicked off with Omicron in January 2022, followed by the Ukraine war in February 2022. And the fact remains that war in any part of the world can spark off a series of events that can have significant consequences for the entire world.
That is exactly what transpired. Commodity prices began booming, and it resulted in inflation, which in turn led to lower demand for certain categories. Many overestimated demand for the year, but consumer packaged goods’ (CPG) volumes did not increase as per expectations last year.
Industries such as hotel (hospitality), travel, automobile and airlines, however, had their share of glory.
According to NielsenIQ’s FMCG Snapshot for Q2 2022, the FMCG industry had grown by 10.9 per cent in the quarter ending June 2022, versus six per cent in the previous quarter (Jan-March 2022).
As per the findings of the report, while volume decline continued for medium and large manufacturers, small manufacturers (less than Rs 100 crore in turnover) had recovered to a positive volume growth of 1.8 per cent in Q2 2022. This recovery was primarily driven by the food segment, with a growth of 5.6 per cent, compared to –5.5 per cent in the previous quarter. Despite an uptick from the previous quarter, non-food continued to show negative volume growth of -13.8 per cent in Q2 2022, compared to -20.4 per cent in the previous quarter.
The report also brought out that the food segment had seen a positive volume growth of 1.8 per cent in Q2 2022, especially with impulse categories such as chocolates and salty snacks growing by 15.1 per cent. Despite the non-foods segment remaining in the negative, there was a marginal uptick from –9.6 per cent in the previous quarter to -6.4 per cent in Q2 2022. Within the non-foods segment, non-essential personal care categories such as perfumed deodorants and cologne saw over 40 per cent volume growth, buoyed by the summer season and consumers heading out for both work and leisure activities as they got back to their normal routines.
Discussing some of the challenges and learnings for their brands that cropped up during the past year, BL Agro managing director Ashish Khandelwal said, “Our major challenge last year was the wide fluctuations in the market. We tried to manage those through the stock we kept as a reserve. If we talk about the food market, the graph has been upward, and to maintain that upward graph, we had to manage.”
He further added, “We saw a huge demand from the market and learned to cope with it. To cater to the growing demand, we set up a new manufacturing unit this year in Bareilly, which comes with its own challenges and learnings, starting from production to logistics.”
The media split between traditional and digital
Coming to the media side, because traditionally that’s where all the advertising moolah went – growth in the television industry in 2022, in terms of viewership, was negative. Last year, the consumption of television had gone down as compared to the previous two years, owing to more people returning to the work from home (WFH) format and other reasons for the quality of programming.
TV viewership, as a whole, shrunk – be it the Hindi-speaking market (HSM) news channels, FTA GEC, movies and even regional GECs. However, the FTA movie genre grew.
News viewership went for a toss. With FTA channels from leading networks logging out of DD Freedish, the GRPs from FTA GEC channels vanished due to a lack of adequate programming. IPL, which was essentially TV earlier, was split into digital and TV. Leading channels like Star Plus started airing their programs between Monday-Sunday (instead of Mon-Fri). Experts understand that while we witnessed a host of new channels pop up in the FTA movie space, their future will now depend on how the FTA GEC’s re-entry into DD FreeDish homes pans out.
In the past, though television was considered the most important medium for a brand to make it big, that doesn’t seem to be the case anymore. With brands opting for digital advertising, it has expanded the medium and become a much sought-after means to put across their message to a targeted audience.
As Dabur India head for media Rajiv Dubey puts it, “Bad news for television meant that advertising on digital grew leaps and bounds and got almost 90 per cent growth over last year’s numbers. As more money moved into the performance side of the business, one is seeing a slowdown/rationalisation of spends in ‘app-based’ businesses, in e-commerce, edutech and the downfall of crypto economies. Digital business, however, is still likely to grow in low double digits next year.”
Amway India chief marketing officer Ajay Khanna observes that last year, one of the biggest trends that they witnessed was the shift in the mindset of the health-conscious consumer from the realisation to the adoption stage with a focus on preventive healthcare.
“Today, consumers are going beyond products and looking for holistic solutions which can address their overall health and wellness goals. Further, the no-compromise attitude of health-conscious, digitally savvy consumers has intrigued brands to innovate and offer well-researched wellness products and solutions, in newer formats along with seamless and superior digital experience,” he points out.
Khandelwal of BL Agro reveals that last year they had allocated Rs 150 crore as their media budget, keeping television and digital as the main mediums.
“We used close to Rs 80 crore of the allocated budget across all media for promoting our brands. A part of the budget was allocated for advertising and marketing, and the other part was allocated for merchandising at our various stores,” he states.
There had been deep cuts in ad spends by various FMCG players owing to the economic slowdown, but Khandelwal begs to differ, as he believes that FMCG is a segment where demand will never go down. And hence, apt and prudent advertising is always required.
He cites, “We, at BL Agro, spent heavily on advertising last year—more than ever before. We know our target audience for both brands—Bail Kolhu and Nourish—and the ad spends were allocated as per the need. We are not looking at any ad expenditure cuts in any of our marketing campaigns.”
Looking forward
From the futuristic trends point of view, Dubey of Dabur predicts, “Influencer marketing has seen massive growth in the last few years, and that’s likely to grow even bigger. While it’s difficult to predict what will work better in terms of ROI, I sincerely hope that sports starts to give a better ROI; however, from the looks of it and seeing the cost at which the sports rights are bid in this country, it’s going to be out of reach for most CPG clients.”
He adds, “We are hoping that as inflation eases and demand picks up, we will be ready with our ammunition and higher spending for the year 2023.”
From the brand and product offerings point of view, Khanna of Amway elucidates, “As we move forward, we will focus on the trends that will continue to dominate the industry, which include the rising demand for plant-based nutrition supplements, products with herbal and Ayurvedic ingredients, healthy beauty, personalised nutrition solutions, the rise of the gig economy, and accelerated and deeper digital adoption. With the growing wellness economy, people are looking for solutions beyond just products.”
Khandelwal foresees, “Due to the on-going Ukraine-Russia war, the year 2022, saw price fluctuations in the wheat and oil categories. We see a major shortage of wheat and other raw food materials in the year 2023 as the buffer which was there with the government and stockists are coming to an end. This will eventually see a price rise as well.”
BL Agro recently launched a new manufacturing unit to double the production of its existing portfolio of 75+ products. It would like to build on this and focus on the same for next year. In October 2023, the company plans to come up with new product categories.
It will be interesting to note how brands and companies will be putting themselves back together after the two-year slump, and how easy or difficult it’s going to be for them, only time will tell.
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