What is common between company that provides us our breakfast cereals, a dairy company, a bakery products company, and a cosmetics manufacturer? Well, yes, they are all FMCG players. But in the current digitally connected consumer world, they are all also explorers of the omnichannel omnibus.
The distribution model for FMCG (Fast Moving Consumer Goods) companies in India has undergone a metamorphosis of sorts fueled by the growth of e-commerce and the increasing importance of digital channels. To reach out to digitally savvy consumers, FMCG companies are also increasingly leveraging D2C mediums such as their websites and social media platforms. It is estimated that the potential impact of D2C on the domestic revenue of mainstream companies could be more than 30% for large firms. However, consumers today are not just restricting themselves to digital platforms. They are exploring every available channel of consumption. It, therefore, makes a good business strategy for FMCG players to engage with customers through various channels like brick-and-mortar stores, e-commerce platforms, D2C and social media. Undeniably, we are firmly into the omnichannel era, and it is here to stay.
But how are leading FMCG companies finding an equilibrium at a time when distribution models are becoming more complex and dynamic? How are they leveraging the range of channels and technologies to reach and engage with consumers? How are they navigating the new and emerging buying behaviours?
Raj Kanwar Singh, MD, Bimbo Bakeries, India giving a glimpse into the sales pattern that driving the company's omnichannel choice says, the company sells its three bread brands in India – Harvest Gold, Modern Bread, and Kitty Bread – across channels. “Something peculiar about bread is that a lot of purchase and consumption happens early in the morning before breakfast, and everybody wants a fresh loaf of bread. So, for us still, 90% of sales is general trade and the balance is roughly equally split between modern trade and e-commerce.”
For a dairy company like Mother Dairy, the sales pattern is similar. Manish Bandlish, MD, Mother Dairy, explains that Mother Dairy Fruit & Vegetable Pvt Ltd has multiple lines of businesses and how the omnichannel plays out depends on the nature of the product. “Sales across channels differs,” he says. For example, for milk, the percentage of sales is more offline just like bread. But when it comes to frozen products, the shares of sales on online channels are more than the general trade. “So, it really depends on which product category you're talking about,” he explains.
So, if bread and milk, our breakfast staples are bought more off the shelves in stores and local groceries, are cereals, another breakfast must-have, also sold more through stores than other channels?
Bagrry’s India, pioneers in the category, are credited with bringing cereals to our breakfast table. Aditya Bagri, Promoter, Bagrry’s India, says that when the company started out, it was pure general trade business. Baggry’s have been selling breakfast cereals in India for almost 30 years in the GT mode but increasingly, it’s becoming an omnichannel business. “A lot of new consumer acquisition is happening online and in organised retail shelves,” says Bagri. As there's an increasing amount of complexity in product categories, for example, muesli now comes in different varieties, “protein muesli does much better online versus the flagship muesli which sells across all channels,” says Bagri. This market insight has helped the company segment cereal by consumer cohort.
How is the complexity of omnichannel playing out for bigger companies with a host of products and channels? Samir Kumaar Modi, MD, Modi Enterprises runs three companies – Modicare which is one of India’s leading direct selling companies, Colorbar which is a pure cosmetics company, and Twenty Four Seven Convenience Store. He says Colorbar is predominately offline, 70% of which is in GTM tiny POS and 30% happens through the marketplace. “We don't really promote our own website, simply because D2C is the wrong word in our industry,” he says. Modicare, the MLM business, with its growing family of 60 lakh consultants, has a large number of people joining for self-consumption and to make money.
Please drop this line. The number mentioned is unclear. As regards the Twenty-Four Seven Convenience Store, 50% of the business happens from 10:00 to 9:00 and between 9 to 10, 1:00 to 4:00 am is 30%. Of this, 17 per cent is ready-to-eat, which is fresh food, 10% is tobacco and the balance is toiletries, cold drinks, milk, cereal, or ice-cream.
Speaking from his consulting and advising experience to FMCG companies, Harsha Razdan, Partner & Sector Head – Consumer Markets, Lifesciences & Internet Business, KPMG in India, commenting on the trends in consumer behavior and how consumer companies can make their business optimal with regard to omnichannel, says, “I think it's more about consumer commerce. We have to get to the consumer wherever and whenever they want.” Currently, most companies are in a domain where they are trying out different things. It’s a confusing situation and in the next few years, there will be two paradigms to open – one, the platform players will become stronger and two, large retailers. He advises brands to go into specialties. As we go along, brands must choose where they want to have primacy and then take support from different channels. That's the way to go,” says Razdan.
Talking about the kind of management that goes into each of these channels, Bagri says, “Incremental business in India today is becoming increasingly complex in the consumer landscape.” Based on their work in Bagrry’s, he adds that what is worth is “differentiated focus”. Having a razor-sharp focus across key channels like general trade, modern trade, e-commerce, and adjacencies around, communities one could get into is essential. Right from the way one is ideating, product pack size, price points – the need is for a focused narrow funnel. With a vision to build the brand into one of India’s most trusted health food brands, Bagri says they are out there “ideating with the whole bunch of experts” on superfoods, larger pack sizes, back forms, etc. “Specifically for Q-commerce because there is more out-of-home consumption happening. So, the complexity increases and then you have to really narrow down on those innovations to see which is the common denominator,” he explains. “You have to be comfortable and scalable enough to have something going for GT which you know may never reach e-commerce and vice versa.”
Singh of Bimbo Bakeries agrees that “different channels call for different skillsets”. Elaborating further he adds, “General trade was all about distribution, visibility, the viability of routes, and displays at the counters. Modern trade came in about two decades back and we all started to learn how to navigate it.” And now we talk about a very different set of parameters. “But the end result is that you still want visibility you still want presence across channels but how to navigate it all changes completely,” adds Singh.
Bandlish of Mother Dairy notes, “The consumer today is highly informed.” If we divide them into multiple categories there are the value-conscious customers, there are those looking at convenience and those who are looking at a premium product as well. “So, there are well-defined customers that exist in India today and they are also exploring and experimenting with the various channels,” he adds. There are certain channels which have just bloomed. For example, money is pouring into q-commerce. “From Mother Dairy’s perspective, when we decide what to do with each of these channels, we categorize what is the role each channel will play for each of the categories of consumers that we know,” says Bandlish.
What he points out is that each channel player is motivated by his own set of factors.“For me, I will service that model as long as the customer is coming and buying my product, but for a premium portable product, like frozen yoghurt, for me, GT is important,” he elaborates adding “but I would like to use the channel, for example, of online player, or modern trade, to drive these categories, much more than GT because they have the premium customer coming in to buy, not necessarily value conscious, but people who are looking for convenience, people who are exposed to product categories, which are beyond our normal GT routes.”
Bandlish says Mother Dairy creates a grid where each product category is mapped with what role each of these channels plays for it. “We even take a call not to be present in some regions.”
Modi Enterprises is not only present in diverse channels but also in diverse industries. Modi points to customer segmentation saying customers who come to say Select City Mall in Delhi or Pacific Mall have a different mindset from those who buy products from Modicare consultants. He also talks about the cannibalization buy online and the discounts and Black Friday sales, all of which impact the company’s channel decisions. As regards the Convenience Store, “it’s very consumer-driven,” he says. “My goal is that I should be 50 meters from your home, and you should come at least once a day and the food should be good and the price suitable,” he explains.
The approach to omnichannel differs from industry to industry, and sector to sector, but there should be a broad understanding and a common theme as to why the brand exist, says Razdan “If your brand purpose is clear, the channel purpose follows. However, if you are not clear in terms of what the brand is doing, then omnichannel becomes a sort of bloodbath area. That's the Golden Rule,” he explains. He further adds that while in business, you'll have many ideas coming in from teams, as the head of the business, the promoter or the CEO of the company must be clearer in terms of what the purpose is, what am I trying to do? Is my strategy in line?
As regards Quick Commerce, the question currently is whether it is cannibalizing all platforms and the marketplace or whether it is a new incremental source of business for FMCG companies.
In the context of bakery companies, Singh of Bimbo bakeries says it’s a bit of both. “Q-commerce has now become a habit and is no longer discount led. I don't know about the viability side of it, but it has found its feet.” The fact that the q-commerce players can charge for that quick delivery and consumers are willing to pay for it, proves this. Q-commerce for certain products, for example, gluten-free bread or sourdough bread, has become an incremental business and is having an impact in many places on GT or replacing GT for certain categories. Certain niche products if it were not for e-commerce, would have remained unconsumed. “The minimum viable audience shrinks with e-commerce,” he adds.
For Mother Dairy, q-commerce has seen rapid growth and “we have a dedicated team which takes care of the e-commerce and q-commerce,” says Bandlish. In fact, q-commerce has overtaken e-commerce. “Q-commerce is the preferred choice for the consumer right now,” and the company has a dedicated team working with the q-commerce players. In terms of challenge, Bandlish identifies being able to be available at each of the “dark stores”. He adds the information available is scarce and this makes the use of technology extremely important to be nimble and service each of the players with the product they want at a given moment. “We track the availability of our products across the various PIN codes, and distribution centers and we have been fairly successful in terms of making our products available across various platforms on quick commerce.”
For Bagrry’s, though the core category of breakfast cereals is a habit buy and people stock up, given the assortment that they offer and the fact that globally more and more people are having breakfast out of home, there has been tremendous growth in q-commerce segments, both for the core portfolio as well as a lot of innovations. “Q-commerce for breakfast cereals has worked tremendously well and is increasing faster in the overall e-commerce ecosystem,” says Bagri. He adds, “There’s definitely an implication in terms of pack sizes and we've actually developed a product portfolio to cater to the immediate needs of consumers.”
The shift in the mindset of the companies is apparent when it comes to quick commerce. Earlier, there would be products and companies would look for channels for those products. But now there are channels and FMCG players are ideating products exclusively for them.
However, the question facing businesses now is whether q-commerce is viable. Whenever there is a new channel entry into the market, it disturbs the equilibrium. Razdan says, while the old businesses are the cash cows and earn more money, the new businesses struggle over a period and settle down. “So, I think we have to give it time.” He advises brands to not get overexcited or under excited. “Everyone's experimenting, and though I can't comment on profitability, I think eventually every channel reaches its peak. Hopefully, this will too.”
As regards finding equilibrium at a time when omnichannel is the way to go, is tough for any company. For old businesses like Modi Enterprises, it is all about the bottom line. Singh of Bimbo Bakeries agrees, “I think for the company, clearly, there are times of investment and there are times of net – net will always be about profit,” says Singh.
Bandlish adds that the consumer has multiple choices today and “when we decide a strategy for a particular channel and a product category, we also look at the cost of delivery. “It is very important to control the cost of delivery for each channel and that is where we have to find a balance and equilibrium.”
So how do businesses transform this dilemma into decision-making and find the equilibrium amid the omnichannel chaos? Razdan finds three distinct themes emerging – one is people, that is your own people, customers, and stakeholders you must do the right things by. The second is planet sustainability and the third is profit. “All three of them pulled in different directions.” But as a business leader, you must get your purpose right. Of the 4Ps, how you care for the planet is what will count for a business in the years to come, he emphasizes.
Moneycontrol journalists were not involved in the creation of the article.
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