From Packaged Groceries To Impulse Buys, Small Town Spends Grow In Double Digits

Convenience beats slowdown blues

From Packaged Groceries To Impulse Buys, Small Town Spends Grow In Double Digits

Mumbai: Call them a few bright sparks in India’s consumption story, if you will. Consumers may be choosing to restrict spends on fuel, electricity, new clothes, telephone expenses and out-ofhome entertainment, but they aren’t tightening their purse strings when it comes to packaged foods and grocery. In short, anything that scores high on the convenience index.
    And this is one part of the consumption story that remains intact despite the general growth slowdown. According to insights and information collated by Nielsen India, aspirations — especially for middle India consumers (in small towns between urban and rural) — have remained unchanged despite the tough times. Convenience continues to drive growths for packaged grocery, household cleaning, fabric care and impulse-driven items which have grown in strong double digits.
    The country’s GDP growth has come down from 9.3% in the fiscal year 2010-11 to 5% in 2012-13, directly impacting sectors like auto and financial services. However, the impulse basket is still growing at a healthy 20% (year-to-date May 2013) as against 22% a year ago, while packaged grocery is growing at 24% as compared to 30% a year ago.
    The growth levels may have come down but companies aren’t complaining. “We agree that the slowdown has had lesser impact on the food category, especially in the categories that we operate in. Our own internal growth has been at a healthy double-digit. We also continue to monitor macroeconomic conditions for any future challenges and possible solutions,” said Varun Berry, VP & COO, Britannia Industries.
    The consumer has not stopped shopping for innovatively packaged food products in particular. “Consumers are being more selective. Savings remain number one priority, so she has to make choices. Sometimes this is around basket items, sometimes around frequency, sometimes around lower priced/more heavily promoted brands,” said Justin Sargent, MD (consumer), Nielsen India region.
    In FMCG, the slowdown in non-food — at Rs 1,01,366 crore growing at June MAT (moving average total) 13% in fiscal year 2013 as against 18% in the previous fiscal — is more pronounced than the slowdown in food (Rs 1,09,026 crore growing at June MAT 17% versus 18%). “When times are good, you tend to find consumers expanding their basket beyond essential food items. But when times get a little tougher, some of those more discretionary items can take a hit,” said Sargent. That poses a challenge for packaged food companies to dish out new innovations and keep consumers from restricting spends.
    Berry likes to describe
categories that Britannia operates in — whether biscuits, cake, rusk, bread or dairy — as among everyday “low expense delight providers and satiators”. “We can justifiably say that the demand for so designed categories will continue to be robust even in the event of a slowdown. Besides, we have redesigned our offers to take advantage of the trends of migration to the middle and convenience seeking. For example, price correction of the Good Day low unit pack in some markets and increased sales focus in others has yielded rich dividends for a brand that is in the upper third of the price ladder,” said Berry.
    Another reason why impulse-driven items are still growing at high double digits is because marketers haven’t stopped activation initiatives at points of sale. “The onus of driving the impulse category growth is on the marketer. Activation at the point of buying is a significant driver of growth. The category is such that it remains insulated from external pressures as long as marketers are doing the right thing,” said Sunil Taldar, director (sales & international business), Cadbury India.
    A large part of consumption expenditure is also coming from middle India, which is fuelling the overall growth. Berry of Britannia said middle India has helped grow its brands like Marie, 50-50, Good Day and Milk Bikis.
    An ITC spokesperson said, “The growth of middle India and their aspirations drive the demand for branded packaged foods. This segment of consumers is moving from unbranded to branded product offerings, from unpackaged to packaged products and is also choosing products that are healthy, tasty and hygienic. Hence, the growth of middle India augurs very well for ITC as they contribute significantly to the consumption of modern branded packaged foods.”
    ITC, which has also launched several premium products including Delishus cookies, is encouraged by the growth achieved in the instant noodles segment with brand ‘Yippee’, highlighting the importance of differentiation and convenience even during a downturn. As for the long-term outlook, ITC appears positive.
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    The slowdown has forced consumers to cut down on fuel, electricity, clothes, phone usage, entertainment
    But packaged groceries are still clocking 24% growth compared to 30% a year ago
    Household cleaning and fabric care products have also grown in double digits
    The impulse basket is also registering 20% expansion as against 22% a year ago on continuing sales promotions