In many ways, the fast-moving consumer goods or FMCG company is the defining foundational business that typifies early corporate India. The FMCG category—represented by the cake of soap you use, the skin cream that takes care of you through the winter months, and your favourite brand of tea—is something we have learnt to live with (and struggle without) over the decades. The brand at one end and the consumer at the other have been friends with benefits. Equal benefits even. Well, nearly.
As I tap this piece onto my desktop, my fingers quake with anticipation of the times ahead, even as this entire category is really at the crossroads today. The FMCG category represents a size of $200 billion in India as of today. The biggest companies in the FMCG space are, however, experiencing a unique quake. Topline growth is rather static, price-lines are under stress, premiums are being challenged by the consumer at the retail points, and the rather comfortable margins these companies were used to reaping (and in some cases repatriating) are under acute stress.
The good and big companies in this space already started tweaking their business models some two years ago. The relatively braver and philosophically stoic companies are hoping the environment of business will change and they get their lost shares and margins back. And the smallest of them are in a state of confusion. All of them out there do, however, realise that it’s not business as usual. Something big is amiss.
What’s happening in FMCG-dom is a bit of an earthquake, a pandemic and a tsunami, all rolled into one. Let me call it a ‘PanTsuQuake’. A tectonic shift of many kinds on many fronts. The trend-lines of each of these have been shaped over the last four years, ever since the Covid era gave way to a new era of consumption and consumptive behaviour all over again. Let me list the big seven.
1. The distribution clout is over: Once upon a time, the company that had the biggest distribution reach in India was considered a market leader. In more ways than one, this company could create every kind of brand that would make an entry into the kitchen, bathroom, bedroom, dressing room, and indeed every nook and cranny of a needy home. If your brand could enter into a sizeable percentage of the 14.6 million retail outlets in the country, life was made. You had set up the distribution channel with decades worth of hard work. It was now time to fill the pipe and let the consumer open the tap of consumption at the other end. At one end of the distribution channel was the FMCG company and at another end, 301.3 million homes waiting to buy. Distribution was therefore the prime prowess. He who had the widest one ruled.
Life was relatively simple until a few years ago. Today, we live in an age where distribution is not in the hands of the few. Yes, traditional distribution that is laborious, omni-channel and multi-layered is still with the big MNC of the overseas and Indian kind equally, but there is yet another layer of new distribution that has entered the market. Today, India can be reached in a jiffy through e-commerce of the B2B and B2C kind, quick-commerce applications such as Swiggy and Blinkit and more, and D2C platforms that reach out to you through social media channels.
While that bottle of Dettol you ordered on Amazon might take you three days to reach, Blinkit will bring it to you in 10 minutes. A D2C platform will bring you that totally new disinfectant brand you have never heard of before. You don’t have to buy brands that sound boring and old anymore. You can buy the new, the ones with zing. And those who buy these stand out, it seems.
Distribution today is a true-blue democracy that even rebels against the hitherto egalitarian hold of the big businesses. Change is here.
2. There are four Indias, not just two: In the good old days, India was described as India 1 and India 2. While India 1 was urban, India 2 was rural. Today, we are four-in-one. India is urban, rurban, rural and deep-rural. In each of these avatars, there is the physical and virtual one to boot. Each of these spaces are reached by the physical distribution system of yore and equally serviced by the virtual new distribution systems of today and tomorrow. Change is here.
3. Premium brands are a marketers paradigm: Premium brands do not exist anymore. What was premium yesterday is everybody’s brand today. Surf is everywhere. Bourbon is not a premium biscuit anymore. Just as long as you can offer these brands in low-unit-price packs, the most premium brands penetrate into mass homes. Companies that stick to age-old marketing definitions and paper-partitions of premium, popular and mass are finding the going difficult. Change is here.
4. Small is beautiful, bountiful and even big: Recent consumer research exercises carried out by me in India are indicative of the gory fact that consumers are fed up with brand names they have been sticking to loyally for decades. They are looking for change. The small brands of today that tout the holistic, real, green, more healthy and better for the earth are making big inroads. These are quiet inroads, but nevertheless big. When these brands grow, they eat into the biggest brands in the category they live within. And these loser-brands are owned by the biggest FMCG companies around. Change is here.
5. The asset-light FMCG is the future: There are nimble new brand offerings hitting the FMCG market today. Many of these are using the advantage of new distribution through B2B intermediaries, e-commerce listings and D2C apps. They are totally asset-light. They have not sunk costs into factories of their own. They are not locked into geographies. They are able to outsource wherever they go. In the bargain, intermediary businesses of the intermediary pop-up factory and pop-up packaging unit have arisen in India. The asset-light FMCG offering is here. Change is here.
6. The FMCG game is a portfolio game: Every brand needs to offer something for the poor, the middle class, the rich and the super rich equally. The new FMCG game is a portfolio game. You must have a foot in every peg of the market. You must be a plug-and-play FMCG. Nifty. Nimble. Give everything to everybody. Change is here.
7. The biggest change is the generation: Finally, the biggest change in our lives is the generation. As on December 31, 2025, the largest living generation in our midst is going to be the alpha generation. Not many of us understand the needs, wants, desires, aspirations and, importantly, fantasies of this generation. Change is here. Let’s change.
Harish Bijoor
Brand Guru & Founder, Harish Bijoor Consults
(Views are personal)
(harishbijoor@hotmail.com)