Emerging Trends and Challenges in the FMCG Sector

The Fast-Moving Consumer Goods (FMCG) industry is witnessing a robust transition due to the Covid-19 pandemic, rising demand for more convenience, and the changing dynamics of customer behavior. The aforesaid factors have accelerated many FMCG industry trends, bringing to the surface digitalization, and heightened consumer awareness about health, and environmental consciousness. 

The FMCG sector in India currently is the nation’s fourth-largest sector, employing over 3 million people and it is projected to rise at a CAGR of 14.9% to reach US$ 220 billion by 2025, from US$ 110 billion in 2020 and undergo a powerful growth in both rural and urban consumption. The urban segment is the prime contributor to the revenue generated by the FMCG sector. However, in recent times, rural consumption has shifted the urban segment to the backseat, holding a huge chunk of revenue share. 

In the forthcoming future, we can expect the following massive trends in the FMCG industry:

Growing consciousness for Health and Wellness :
The outbreak of covid has been a living epitome of uncertainties. It has further instilled the importance of health and wellness in the minds of people. They are taken over by deep awareness of feeding themselves with quality food, walking an extra step, and incorporating imperative changes in their diet and lifestyle.  

The ‘being watchful of what they buy and what goes into their bodies, internally and topically’ mindset is going to promote organic, nutritious, superfood-based, preservatives-free, and natural products, making them a big hit amongst the masses, irrespective of the category.  

It’s paramount for all FMCG companies to embody healthy and quality ingredients in the product DNA. With rising consciousness about well-being and the proactive attention its implementation requires, the products that once used to be available at only specialty health food stores have made it to normal supermarkets, thereby being easily available to the public. Products like vegan protein, plant-based milk alternatives like soy, coconut, almond milk, grass-fed meat, and alcohol-free mocktails are gaining traction and availability. Similarly, allergen-free products for dairy, gluten, nuts, sugar intolerants, etc are also being preferred and becoming popular amongst those who don’t even have allergies, as a safety measure against possible ailments. For example, earlier gluten-free products were adopted exclusively by those suffering from celiac disease, whereas now consumers who don’t face any such allergies are gradually switching to them due to the perceived health benefits of a gluten-free diet.

E-commerce, the new shopping mall:

During the period of the pandemic, consumers found it easier and safer to shop online. This shifted consumers’ shopping habits toward online channels, creating a dramatic increase in consumer demand on online platforms, which further brought a huge influx of unparalleled growth to the FMCG industry. 

The proliferation of e-commerce business is led by cutting-edge technology both in urban as well as rural areas. Undoubtedly, the share of sales coming from e-commerce is augmenting exponentially. The cherry on the cake is the ease and comfort of accessibility they provide, with a range of options to choose from, and lucrative discounts. 

Owing to the overwhelming consumer product demand in e-commerce, brands are now tempted to build and enhance their online presence to boost their engagement with consumers. The setting up of direct sales channels on multiple digital marketplaces, standalone websites, and stores is on the to-do list of most brands. 

Social media is altogether catalyzing the growth and adoption of e-commerce. Platforms like Instagram, and Facebook are some of the best options to sell items and products on as users actively engage there. 

Almost every FMCG brand has partnered with big e-commerce websites like Flipkart, Amazon, Blinkit, Big Basket, and others. Adding on, online departmental stores like Zepto, Instamart, and BlinkIt not only fulfill last-mile deliveries but are quick, easy, and user-friendly. All this has significantly resulted in a surge in demand for instant meals; Ready to Eat (RTE) and Ready to Cook (RTC), thereby influencing current consumer preferences. As a result, FMCG start-ups actively embrace diverse media, leveraging mobile and headless commerce, to market their products.

Digitisation and Technology driving the growth of the FMCG sector:

Long ago, the FMCG industry was represented by local stores, small shops, malls, and sales representatives, but the present era’s industry stands prevalent and pertinent, bolstered by the latest tech-driven infrastructure.  

Post the pandemic crises, digitization has emerged as a trend shaping the future of retailing consumer goods.

  • Automation of production processes: Technology automates various production processes, from packaging to labeling. This not only is time-saving but also reduces the dependency on manual labour, thereby leading to cost savings. 
  • Improved inventory management: The logistics and transportation required in the process of distribution of FMCG products are made efficient through RFID tags to track inventory levels, locations, and predictive analytics to anticipate future demand. 
  • Improved logistics and transportation: The use of GPS tracking optimizes delivery routes, and the use of drones and robots are used for last-mile delivery. 
  • Enhanced customer service: The incorporation of AI and chatbots provides hasty and efficient customer support services. 

Create more personalized marketing campaigns:
The perfect use of big data and data analytics helps to understand customer demographics and customer behaviour and accordingly target them with relevant ads and offers. 

Technological advancements like the above and others like face recognition, algorithm analysis, AI and data analytics, IoT, predictive analysis, and blockchain are revamping the landscape of the FMCG industry. Therefore, the sales environment of the industry is also undergoing huge alterations. There’s no denying that the brands that are in line with the leading technologies, innovations, and data to deliver the best customer experience are bound to succeed. 

The industry is expected to grapple with the following challenges:

The FMCG industry controls the majority of home products, and its market generates massive revenues and is extremely competitive. However, the industry has also witnessed significant ups and downs during the pandemic and is currently striving to survive the deep waters of new demands and restrictions. As the world economy is in a state of jeopardy, people’s incomes remain stagnant, the job market is performing poorly, and it might affect the consumer demand for FMCG products. 

The stakeholders of the industry will have to follow a holistic approach to navigate through the following challenges:

Environment and Sustainability

FMCG has often been trapped in the shackles of controversies for being engaged in environmentally harmful activities. It’s relieving to see the youth of today inclined toward businesses that support sustainability. As per an article published in Forbes, FMCG businesses should invest in R&D to help bring down nearly one-third of the world’s greenhouse gas emissions. 

To start with, the least the FMCG businesses can do to adhere to the environment and sustainability is to adopt sustainable ways of practicing like recycling and reusing, minimizing plastic use, consciously eliminating waste, switching to alternate packaging methods, sustainable sourcing, and plant alternatives. It’s cardinal for industries to keep environmental consciousness at the forefront of their strategy. Organizations that embrace and practice sustainability across their entire ecosystem can reap the benefits of stronger consumer bonding. However, the possibility of charging a premium to settle for the risen costs will be restrained as the buyers will consider sustainability as a given and not a perk afforded by few.  

Marketing and Multi-channel Engagement

While the objectives of marketing remain unchanged, the strategies for realising them are progressively evolving to meet consumer demand. FMCG organisations should decipher the journeys of all their customers to discover new approaches and encounter ways to interact with them. Going on, it is important to build and market the chosen channels and to create, reward, and distinguish your market strategies. 

In the current tech age, people use the internet to do their research while shopping and then place their orders. Such solutions extend unmatched safety and convenience. The FMCG must resonate with such market developments to procure and maintain a substantial market share. 

Podcasts and voice assistants are excellent means of advertising platforms. Firms can use these mediums to direct the research processes of their customers and enable a strong brand memory. A robust IT infrastructure is what FMCG firms require to boomingly adjust to the shift toward digital platforms. 

Aging- Creating a balance

The FMCG industry is renowned for maintaining its brand loyalty. While this is a key driver for long-term growth, it’s equally essential to understand who their target market is. FMCG businesses can have a tough time maintaining the right balance of serving and satisfying a range of age groups, in comparison to industries that cater to a certain set of consumers. 

The senior citizen category has always been the backbone of the industry and often spearheads brand loyalty. With the dominant hit of the pandemic, they have gradually shifted their preference to products that are straightforward, dependable, and risk-free. The fix to these concerns is simple. FMCG companies can make minor tweaks to the ingredients they use, limiting chemicals, and incorporating more natural components, both in edible and non-edible items. 

It’s also crucial to be mindful of the preferences of the current generation. There’s pressure on the FMCG market to be in alignment with the millennial age of today as they are well acquainted with technology and goods and services from across the world.  

To gain traction from both, and disappoint none, it’s critical to find a neutral position. This can be achieved by rigorously changing their tactics, going digital, and delivering easy accessibility.

Striving toward a fruitful tomorrow

The outbreak of the pandemic is a major stimulant of technological advancements and a learning event for many. It has also profoundly restructured the landscape of the FMCG industry, with an understanding of opting for an omnichannel approach to seamlessly evolve in the dynamical environment of today.