NEW DELHI: The Indian consumer can be expected to "trade downwards", that is buy cheaper alternative goods as job losses and pay cuts sink in, feels Nestle India chairman Suresh Narayanan. Though Narayanan also believes that as a result of the pandemic, consumers would also be looking at "trustworthiness, quality, safety and health" in a brand, he believes that consumers would focus on buying essentials as against other goods and there "would be a lot of trading downwards," though there would also be some consumers who would move towards premium goods.
According to market research firm CMIE, India’s unemployment rate, which had stood at 7.7 per cent as on March 8, rose sharply to 27 per cent by May 3.As India went through a prolonged lockdown, the informal sector, several small companies and factories laid off workers, adding to the numbers of unemployed in the country and simultaneously triggering off mass exodus of migrant labourers from large cities.
Anecdotal evidence suggests that a large number of firms also resorted to wage cuts in the last two months. A study by Deloitte suggested that 27 out of NSE top 100 companies will not be able to sustain their current wage bill if revenue dips by 30 per cent or more.
Narayanan, an alumnus of the prestigious Delhi School of Economics, also felt that a "crisis presents a great opportunity to redefine yourself." Most large firms have started reimagining the post-Covid world and working on changing product portfolios and business practices.
Among others, ITC and JK Group have been brain-storming on changes that may be necessitated in the post-pandemic environment. Narayanan also saw a "resurgence of neighbourhood groceries in the post-Covid world" even as e-commerce firms strengthened their position. He also saw consumers seeking comfort in indulgence food products during the lockdown and even afterwards as "eating out would be constrained." He saw the idea of restaurants and street food being altogether redefined in the post-Covid world.
Firms would also be investing in increasing machinery capacity as social distancing norms would mean the maximum deployment of workers at a factory would be at 75 per cent of previous levels."Larger companies are trying to use technology, value engineering" to try raise output to previous levels, the Nestle CEO pointed out.