by Vaishnavi J Desai

FMCG industry steps up its digital game in 2016

Jan 27, 2016
AnalyticsBusinessConsumer Electronics

The indian FMCG industry realized only recently that it was missing out of the digitization race. FY16 presents opportunities for the sector to catch up.

Ever felt the urge to get a ring side view of a change happening on a major level? Do you feel the need to be a part of it? And do you want to see how changes happen at Midnight Express speed when deadlines approach? It’s easy. Just keep up with India’s FMCG sector in 2016.

Growth of FMCG

The FMCG sector paints a positive picture for the upcoming year. The industry is expected to grow to a size of $103.7 billion in the year 2020, reports India Brand Equity Foundation (IBEF). Rises in income levels of the working class, and favorable demographics, will lead to increased consumption and can lead to the above stated result.

Another large driver is the rural FMCG market, which is expected to grow at CAGR 18.1 percent. Rural India is catching up fast as income levels rise. IBEF reports that the total Indian rural income is projected to reach USD 1.8 trillion by 2018.

“This is one of the best times for technology to make a difference to the FMCG sector. For instance, in terms of distribution, growth and improvement has been underpinned by technology. Be it in terms of supply chain analytics or use of mobility to gain faster access to consumer data,” says Asheesh Malhotra, partner, IT Advisory Practice, EY.

Another catalyst accelerating the growth of the sector is digitization. If you look at things from the consumer’s standpoint, consumerization happened mainly because digitization gave it a huge thrust. “E-commerce puts consumer at an advantageous position. Companies have done better targeting of their user sets in 2015, which has given them an opportunity to grow,” says Malhotra.

Other initiatives FMCG players are taking on for FY16-17 are improved digital marketing techniques and using advanced tools to analyze consumer’s consumption patterns better. All this is again underpinned by the strategic use of technology.

“We are going where the consumer is and wish to engage with them through innovative digital programs. We are reaching out to them as an untapped, core potential audience,” said Jayant Singh, executive vice president for Marketing at GlaxoSmithKline Consumer Healthcare, in an interview to Business Today.

Another factor that will drive growth in the industry is a precise and customized approach toward the customer, says Santosh Singh, associate vice president-Information Technology, Dharampal Satyapal. It is now more important than ever to connect with the end customer and understand their issues better. “We have to be very specific with what we give the customer. Generic approaches won’t help anymore,” says Singh. But how can IT help this trend find a place in companies?

Singh says companies always had access to primary and secondary consumer data. But the problem was finding tertiary data, as it never reached the organization. “Technology innovation in the analytics domain helps bridge that gap,” says Singh. He also believes that the untapped potential of that data will open newer opportunities for the FMCG sector.

Betting on E-commerce

India stands on the threshold of growth in Internet and e-commerce activity. According to the Internet and Mobile Association of India and IMRB International, by the end of 2015, India will have the second largest base of internet users in the world, with 402 million users. Bain & Company’s analysis anticipates that by 2020 that number will reach 650 million.

The research also indicates that online penetration in India could reach 50 percent by 2020.

Considering the huge number of digital Indians shopping online in the near future, it is a bit disappointing to find that at present, the e-commerce market is just at $5 billion in size.

Some of the initiatives FMCG players are taking on for FY16-17 are improved digital marketing techniques and using advanced tools to analyze consumer’s consumption patterns better.

In the coming years, the e-commerce balloon will get bigger. The growth of the market will be directly proportional to the growth of Indian Internet users and digital natives. According to TechSci Research, the Indian e-commerce sector will grow by 36 percent from 2015 to 2020.

“This is an unprecedented time in the e-commerce sector and as a CIO you get to witness this first hand. There’s no other sector that’s as challenging and as exciting at the same time,” Shamik Sharma, CTO and CPO, Myntra, said in an interview to CIO in June this year.

Another company that is betting huge on digitization is MTR Foods. With a 90-year-old history of serving authentic Indian Food to Indians, MTR Foods’ new website promises all the authentic recipes at your fingertips. MTR Foods’ journey to being India’s premier, processed food company has been marked by a constant focus on innovation and the adoption of new technology. And to be left behind in the race, it too has its own website called “dishcovery” which hosts all the authentic vegetarian cuisine from across India.

That optimism is widespread. According to UBS AG, the Indian e-tail market will grow 10 times by 2020 to $50 billion. That’s encouraging for e-commerce players.

Digital strategy has to be carved out and it has to be done sooner. Although there are frontrunners in the sector, they have to think of doing things differently for FY16. If FMCG could get through 2016 fairly well, then it’s a smooth ride till 2020.