FAST MOMENTUM CONSUMER GOODS: INDIA’S RAPIDLY EMERGING CATEGORIES AND CHANGING CONSUMER

By: Roosevelt D'Souza, ED, RMS - Client Solutions, Nielsen

The last decade has seen an unprecedented rise in income levels, the emergence of a younger, economically empowered workforce and double income nuclear families. The earliest impact of such change is seen first in personal final consumption and then, more visibly in asset ownership and investment.

For India’s FMCG sector this has meant the growth of existing categories and the creation of new ones at a rapid and unrelenting pace. As consumers ‘trial’ new experiences through products and build a habit for those that cater to their existing or latent needs, they also use these products to signal their own progress.

Over the last year, the growth of the FMCG sector is primarily fuelled by the Food segment that contributes to about 52% of the total FMCG market for branded packaged goods. The food segment also accounts for 65% of the incremental FMCG sales in value terms with categories like Refined Oils (Consumer packs), Non Refined Oils, Biscuits, Packaged Tea and Salty Snacks driving this growth. Within the Non foods segment Personal Care categories like Skin Creams and Toilet Soaps have driven incremental sales.

This rapid growth has been driven by wider, more systemic trends that have shaped the growth of these categories through an alteration of consumer motivation and behavior. Understanding these will be key to defining and driving the shape and form of consumer products in 2011 and the future.

Overall the key trends that are defining the shape of the FMCG market and its direction are: 

• Impulse
• Health and Wellness
• Lifestyle
• Convenience

The pervasiveness of each of these themes is clearly reflected in the set of categories that have managed to grow well above 20% in value terms versus a year ago.

Source: The Nielsen Company, MAT Oct’10

The ‘supply side’ drivers that contributed to this cannot be ignored. They are:

• Focused initiatives and strategies by manufacturers and marketers to grow through mergers and acquisitions, overseas expansion
• Investments in new product innovations and a focus on increasing accessibility and trial through smaller packs/ sachets
• Aggressive rural market penetration to cater to rising rural demand supported by government initiatives, an improved standard of living in most tier II and tier III cities and the demographic dividend in smaller towns

The Impulsive Indian

Impulse products are often described as “unplanned, on-the-go products that are easily available and affordable” by urban consumers seeking instant gratification or temporary indulgence through ‘small pleasures’. Thank to this, key impulse categories like biscuits, chocolates, salty snacks and confectionary are clocking high double digit growth and rapid increments in retail presence.

This trend has also been abetted by the emergence of the Modern trade format in India. The ability to purchase these products in bulk packs and reach for them at check out counters is also propelling this trend forward.

Source: The Nielsen Company, MAT Oct’10

Growth in the Impulse segment is being driven by both, key national players as well as local zonal players that have introduced a large number of variants or new formats. Typically, local players tend to pervade their regional strongholds and offer consumers greater volume per unit to capture a greater share-of-mouth.

Increasingly, this is also taking the shape of an explosion in variants, price points and pack sizes to capture a larger share of wallet.

On the product formulation front, newer attributes like low fat, sugar free, baked and whole grain are being introduced to entice and attract various consumer segments by creating greater relevance and empathy with consumers needs.

The Health Conscious Indian

The FMCG product portfolio is growing to accommodate the rapidly growing ‘health & wellness segment’ that caters to the increasingly affluent, urban, health conscious Indian. 

Today Health & Wellness is no longer about preventive or supportive nutrition. Instead, it is about a heady mix of indulgence, invigoration and aestheticism.

This explains the emergence of ‘modified’ products. For instance, chewing gum, usually considered an item of impulse for children and youngsters have now assumed a new avatar as an oral health aid for adults thanks to ‘Functional Gums’ - a name given to the types of chewing gum which promise to play a practical function like reducing the likelihood of cavities, increasing whiteness etc.

Similarly, 'Functional foods' i.e. eatables which serve as nutritious dietary supplements are growing as ‘healthier’ alternatives to fast food for a young urban population that is constantly on the move. The cereal bar category today is a highly metro-centric product with 70% of its sales coming from metros itself and exhibiting impressive double digit growth rates on the back of deeper penetration amongst the lower urban strata i.e. urban towns with population below 10 lacs.

In terms of snacking, the creation of a new “Baked Savoury” category – borrowing ingredients & textures from biscuits & flavour experiences from namkeens is taking firmer shape. The baked salted biscuits/ crackers attempts to provide healthier and tastier snacking options. At present, the Salt Cracker segment has a contribution of around 7% to the sizeable urban biscuit market and is growing at over 30% per annum.

‘Probiotic’ is another new health mantra that is increasingly being chanted by the urban health-conscious Indian. These products claim to provide beneficial bacteria which aid the optimal functioning of the digestive system. Though small, this segment will most likely emerge as a sub-category if the efforts to educate consumers and increase awareness succeed.

Some categories that are the outwardly manifestation of ‘health’ like “Anti-ageing creams” have grown in significance. Anti-aging products as diverse as anti-aging lipsticks, eye balms, facial creams and hair lotions have taken their place across shop shelves to cater to the health and beauty conscious Indian. Expanding distribution and a wave of consumer interest in these sub-categories have resulted in a surge in their growth rates on a small base.

The Lifestyle Loving Indian

The market for ‘lifestyle’ products – products that are the markers of a better lifestyle for consumers is on the rise and saw consumers from lower population strata’s i.e. rural and semi-urban areas “trade up” from unbranded to branded products. As the lower end of the market becomes more broad-based, the middle and upper end of the market is growing to include new specialized products that will try to make consumers migrate further up the value chain.

Though typically associated with higher-end products, in the context of the mass market, products such as branded, packaged cleaners, pre/post fabric washes and liquid soaps are more telling surrogates to indicate a shift in consumer buying habits.

Source: The Nielsen Company MAT Oct’10

More importantly perhaps, these changes have been all pervasive across geographies with a pace and rapidity that signals a genuine shift in the purchase basket and lifestyles.

From a distribution perspective, while grocers continue to be the leading channel for this segment, the ‘lifestyle’ segment saw an increased presence of “high end” products in modern trade (supermarkets/hypermarkets). For example, “premium” products in laundry detergents, dishwashing, car air fresheners and surface care increased in availability through this channel to target the more affluent consumers who shop in supermarket/hypermarket outlets and who are willing to pay more for specialized products.

The Convenience Craving Indian

For Indian consumers who have typically preferred fresh and home-cooked food, the last decade has proved to be an inflection point as growing urbanization, increasing disposable income and lack of time have prompted an unabated move towards convenience food products.

This trend appears to have stabilized most noticeably in the breakfast and mid-meal segment with these categories gaining consumer acceptance. Marketers too have spent their time getting these products right to make them amenable to the Indian consumer across geographic zones.

Source: The Nielsen Company MAT Oct’10

For instance packs priced at Rs. 10, have been one of the highest contributors to the growth of the Breakfast Cereal category. And in categories like Vermicelli & Noodles, innovative products like Atta Noodles, Pastas and similar ‘hybrid’ products have been instrumental in attracting new consumers to the category.

This space is likely to get more crowded as large multinational and Indian companies launch a wider array of competing products and are joined by strong regional players seeking to expand their franchises.

Overall, these four themes will continue to play out over the next decade too. The strength of these trends will manifest in a variety of ways as manufacturers and marketers attempt to cater to emerging needs and respond to latent consumer needs.

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