At the unveling of the Pitch Madison Advertising Report 2017 last week, Sunil Kataria, Business Head – India and SAARC, Godrej Consumer Products, spoke on the subject of ‘Rebooting the FMCG category’. He shared insights on what it really means to reboot and revive the category, in addition to adapting a winning formula, based on his deep expertise.
At the onset, he admitted that the subject was a contextual one, given the recent move of demonetisation and the serious slowdown of the FMCG category in India. Kataria showed a graph to the audience, which displayed the growth rates of the top six FMCG companies derived from their respective annual reports. The results showed that the growth rates had declined sharply from 12 per cent in 2014 to 2 per cent in 2016.
Money ploughed into promotions, not into advertising
He presented his analysis of how the advertising-to-sales ratio and the promotion-to-sales ratio of the FMCG industry shaped up in the last six years (2011-2016). While the advertising-to-sales ratio remained constant, the promotion-to-sales ratio had jumped from 0.9 percent in the first three years to almost double at 1.5 per cent in the next three years. “What’s interesting is that all that money is being ploughed back into promotions and not into advertising at an industry-wide level,” remarked Kataria.
Short-term versus long-term
Kataria then presented figures, which showed that in 2012, there were 17,000 new product launches, which reduced to 9,500 in 2015. “One thing clear is that investment in new product launches has definitely come down, which shows that we are so caught up in the here and now that the focus on innovation is coming down,” he pointed out.
Stagnant retail expansion
“Distribution is the key to FMCG business,” stated Kataria adding that “the retail universe in India has remained flat.” The numbers showed a steady rate of 0.1 per cent over the last three years.
How to revive FMCG?
Kataria admitted that a rebooting exercise is certainly required. He then proceeded to share his formula to revive the FMCG category, which was broken down into four major takeaways: 1) India has enormous headroom for penetration, 2) There is a need to innovate relentlessly, 3) Accessibility needs to be improved, and 4) There is a need to immerse in rural.
Elaborating on innovation, Kataria cited the example of Godrej itself. “In the last year, we did five new launches.” These included three big disruptions—Good Knight Fast Card, Godrej Aer Pocket, and Godrej Expert Rich Crème Hair Colour.
Speaking about accessibility, Kataria said, “FMCG cannot thrive without distribution,” stressing on the importance of numeric distribution as well as building indirect reach through channel partnerships. “There is a clear correlation between a brand’s sales growth and numeric distribution,” he added. He also stated that it is imperative to invest in e-commerce for penetrating smaller cities.
“Immerse in the rural market. The Union Budget 2017 has also given an impetus by stating that the income of farmers is set to double in the next five years,” he said. Furthermore, he stated that the rural market should be thought of as one. The use of new media—for example, community radios, which operate within a cluster of around 20 villages—may also prove beneficial, according to him. Finally, brands need to be able to offer affordable and portable packages, something Kataria believes most brand managers miss due to their desire to bring in modern packaging.
To sum up the session, Kataria advised the audience to “not reboot, but repeat what you have been doing so well.”