Green shoots visible after six quarters
India’s FMCG industry is showing signs of revival, industry stalwarts said at CII’s National FMCG Summit ‘Growth Wapsi: Revving Up FMCG Growth’ in Mumbai today.
Several companies have beaten downturn. Bellwether companies like Nestle, HUL and few others showcased their experiences at the summit.
“Since liberalization, the FMCG sector has made significant contributions to India’s growth story and the sector has persistently maintained robust double-digit growth rates, Mr. Bharat Puri, Chairman, CII National Committee on FMCG and Managing Director, Pidilite Industries said.
“Contrary to this stellar record, a recent slowdown that is driven by broader macroeconomic factors coupled with tepid consumer sentiment is noticeably impacting rates,” he said.
The sector as a whole is showing signs of revival. The companies that are doing well are those who have built enduring brands, innovated and those who are looking after our planet, Mr. Puri said. He further added that “FMCG leaders like Hindustan Unilever and Nestle as well as a crop of new ‘insurgent’ companies have beaten the slowdown, offering hope and lessons that could help the industry rev up its flagging fortunes.”
“Business leaders must quickly pivot to invest in strategies that will engineer getting back to double digit growth through a rapid penetration increase, culminating in serving more consumers more completely,” he added.
Mr. Puri said the FMCG industry employs close to three million directly and almost 10 million people indirectly. Sustainability is no longer a ‘nice to do’ thing, but has to be a core objective, he added.
Growth is not a birthright
“Growth is an attitude, not a birthright,” Suresh Narayanan, Chairman and Managing Director of Nestle India said, adding that companies should blame the slowdown to their mindsets.
“The mindset in my company is ‘leave the GDP worry to economists, our job is to see that growth happens every day,” he said. Recalling Nestle’s Maggi crisis, Narayanan said it helped the company rebuild its fundamentals of purpose, trust and values.
He called the slackening faced by the industry a “patch.” “We have not gone underground,” he said. While the fundamentals of marketing have not changed, there have been lot of other changes. National plans have given way to localization and clusterisation. Communication needs to be relevant and in the local context. This requires hard work, but those who did it well succeeded.
Narayanan pointed to the big changes that have impacted the sector: the rise of millennials, expanding digitization and the proliferation of choices for the consumer. Consumption trends have changed – it is more experiential, experimental, more health conscious and more social and environmentally focused.
Light at the end of the tunnel
Mr. Nikhil Prasad Ojha, Partner, Bain & Company also said though growth has slowed down over the last 6 quarters, “We are now seeing some green shoots,” Mr. Nikhil Prasad Ojha, Partner, Bain & Company, said.
“There is light at the end of the tunnel. We expect the FMCG industry to regain stronger growth sometime in 2020,” he added.
He said the industry also played a role in the slowdown, pointing to companies that cut down on advertising, innovations and new product launches. Successful companies like Hindustan Unilever, however, did not cut advertising. Over a 15-year period, HUL reinvested the surplus partly into advertising and sales promotion, while the rest flowed into expanding EBITDA. HUL’s volumes are growing ahead of the category in almost all categories.
Speakers also deliberated on the need for sustainability and commitment to a healthier planet. Nestle, for example, plans to achieve100% recyclable usage of plastic packaging by 2025.
The session “Low Impact High Growth on FMCG and Sustainability” focused on Sustainability gaining traction among the consumers brands as a core value and how brands need to chart a more sustainable path while staying true to their shareholders by giving consumers the experience. The industry stalwarts also discussed how individually and collectively they need to collaborate with the government to work towards sustainability.
Mr. Deepak Iyer, President – India, Mondelez, said “One thing that I would like to say about sustainability as per my philosophy is that chasing sustainability goals has never been in conflict of chasing profit goals, that is one big thing that can bring sustainability to the centre of the strategy.”