As consumer behaviour keeps changing, the FMCG sector needs to be constantly be on its toes. Josep Monserrat, CEO, Kantar Worldpanel and K. Ramakrishnan, Country Head, IMRB Kantar Worldpanel, India, share their thoughts on the FMCG sector and the major trends being seen in consumer behaviour and decision making. Monserrat and Ramakrishnan touch upon different topics like the need for brands to cultivate new customers, the Patanjali phenomenon, among other things.
Global brands are moving beyond their comfort zone and exploring new opportunities. How big is this trend and are we seeing this in India too?
Josep Monserrat: It is one of the drivers for tools that manufacturers are using. One is overcoming new barriers and, also, as soon as they get someone who starts using the product for a particular occasion, they try to expand to other occasions by using some communication or activity. This might expand the frequency of buying the brand and this is becoming something that brands are increasingly doing.
Your report mentions that 50 per cent of new buyers in FMCG sector won’t buy the same brand’s products next year? What is the reason for this and what can brands do about it?
Josep Monserrat: One of the reasons is that if you see the buyers that brands have in a year, most of them will buy your brand maybe once or twice a year. This means that you have plenty of infrequent buyers which you might lose next year. Manufacturers need to do one or two things. Firstly, to ensure there is enough churn they need recruit new buyers. This is because they know that they will lose some of them so they need to ensure that they can replace them. The other thing is to retain the buyers that they have by ensuring that they use their product on many different occasions, their products are available in stores; it is top of mind, it is at the right price and has the right packaging.
So what is easier---recruiting new buyers or retaining old buyers?
Josep Monserrat: It is difficult to say which is easier. What we are saying is that the marketers need to shape their mindset because they believe that the buyers they have drive growth and turn them into heavy users. The facts demonstrate that the best way of growing is to increase the users of your brand. What we are saying is you should not only focus on increasing loyalty of existing buyers, but be sure that you extend your penetration. It is difficult but we have provided drivers of growth in terms of driving penetration in the study.
K. Ramakrishnan: I think it is also about whether it is easier to do or important to do. What we are saying is that brands need to build new buyers because this has been demonstrated to lead to growth. We don’t know which of the two is easier but we feel that getting new buyers is important for a brand.
We have seen FMCG products being sold on e-commerce sites. Do you see this is a long-term and sustainable trend?
K. Ramakrishnan: Slightly difficult question to answer. You can look at the global trend and see whether that comes here or you can perceive what the situation in India is and how things will change. Typically, looking at the logistical and distribution challenges in India, e-commerce could be a way that provides some amount of growth but I would not hazard what that growth would be.
Josep Monserrat: Globally, we have seen that the pace of growth of FMCG on e-commerce has really accelerated.
Patanjali has flipped the market on its head. What is the long term impact of the brand that you see on the Indian FMCG sector?
K. Ramakrishan: There used to be brands, brands started associating with a cause and the cause became the reason why brands were bought. Here, it is the other way around. There is a cause and the cause has actually launched the brand. So, this is a new trend. You must have seen that after Patanjali, there have been so many brands that have launched similar products in the market.
What it does to the market in the long term is that since the number of categories where Patanjali has products is so large, it is creating a disturbance across the board. The typical household that buys Patanjali products will start from toothpaste and then go to other products. But do they continue to buy Patanjali products? This depends on the satisfaction they are able to get. Because of the fact that they are present in so many categories, the number of household that Patanjali is able to reach is really large and this is a little bit of an issue for players in the FMCG space.
What is the single most surprising or significant trend in terms of consumer behaviour that you have seen in the FMCG sector over the past few years?
Josep Monserrat: I think probably ‘premiumization.’ I think we have even seen in Western Europe where people go for discounts or private labels to save money. At the same time, they go to low price categories to save money, they also go to premium categories and are quite indulgent. That extreme of saving money on one hand and then buying premium brands is something we were surprised seeing because Western Europe was in recession at that point.
K. Ramakrishan: To add to the point of premiumization, even In India, we would expect sachets to only come for low-priced products but we have been seeing even products come out with low-price sachets in the Indian market. The need to indulge or try a premium product is present across social classes and to cater to this need, manufacturers are creating these products.
Going forward, what are the major trends that you foresee in the FMCG space?
Josep Monserrat: I think what we will see is an acceleration of some of the trends that we have already identified like premiumization, what is related to indulgence, etc. What will happen is that trends that are present will remain and some will be accelerated.
K. Ramakrishan: We see that new categories like herbal and natural making a comeback, not just Patanjali but beyond, will be big. The second is the development of hyperlocal brands in the country since India is multiple countries within one large country. These are trends that we are seeing will be big in the coming years.
What is Kantar Worldpanel’s roadmap when it comes to cross media measurement?
Josep Monserrat: The first thing is what we have announced that is the Consumer Mix Modelling, which is a new way of measuring RoI, which is based on connecting in a single flow, offline audience measurement and we will also be on digital. The second element is implementing our partnership with Facebook worldwide. Then, we are looking at how we can expand into digital from a mobile perspective since it is now very relevant.
Can you tell us something about your partnership with Facebook?
Josep Monserrat: It is a worldwide partnership where we are able to identify when users are exposed to any advertising in a Facebook environment. By doing this in partnership with Facebook in a completely secure and private manner, we will be able to provide brands the impact of their campaigns through Facebook, in terms of sales, penetration, etc. so you have a clear RoI. Brands will be able to benchmark clearly their spends and this will help them decide their spends.
How will new concepts like digital assistants, IoT, augmented reality, etc. change consumer purchase behaviour and decision making?
Josep Monserrat: I think that it already has some impact. The way brands are communicating to their clients or consumers has changed. Earlier it used to be unidirectional, now because of social networks, it is more two-way. Manufacturers are also learning from that and taking heed of the consumers which shapes their communications and helps them to innovate.
In your opinion, how can the FMCG sector continue its growth?
K. Ramakrishan: In our view, one of the things we keep saying is that one of the primary ways that Indian FMCG companies can grow is through penetration. By penetration, we mean what percentage of total households is the brand reaching. One way is to ensure the customer keeps coming back and the other is to reach out to new customers. We believe, and this has been proved by past data, that brands tend to grow by having new customers. This is because customers are not sticking to one brand, they tend to try multiple brands. At least one third of customers of a brand tend to drop out in the following year. In this scenario the only way for brands to grow is by getting new consumers.