After two tough years it's finally a Happy Diwali for FMCG sector

Increased purchase across India, attractive offers, significant promotional activities by brands and rise in ad spends all point to a festive season full of hope and cheer

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Festive season preparations across India began last month with the onset of Ganesh Chaturthi, but with only few days left for the most-awaited festival -Diwali -celebrations have reached an ultimate stage. Amidst the festive fervour and shopping spirit being at an all time high among consumers, brands launch new products in the market, hoping for robust seasonal sales. For the FMCG sector also, Diwali season is considered as the most important time of the year. Given that the last two years were tough for the industry because of GST and demonetisation and hicupps stage of both policies now settling down, this year experts predict that the current festive season could be an opportunity for brands to invigorate themselves. 

Companies now are giving huge discounts and offering attractive schemes to attract consumers. As a result, customers can expect their groceries and other daily use items to be 10 to 15 per cent cheaper this festive quarter, compared to the last two years.

Milind Pingle, Director – Sales & Marketing, Cargill’s food business in India, said, “Festive season is undoubtedly the perfect time to introduce new products and campaigns and various other initiatives that a brand is planning for its consumers." For instance, ahead of the festive season, Cargill's has launched two new products catering to the markets of Maharashtra and Karnataka and also launched NatureFreshActi Heart for consumers across the country. “With our new product offerings during the festive season, we are providing bulk order to our traders, which will ensure that our distributors are well prepared for the festive season," says Pingle.

According to a report, customers particularly spend a lot more on FMCG goods in the festive months as compared to other months of the year. To tap into that increased possibility, brands have decided to even up their ad spends to woo as well as expand their customer base. Many companies always allocate a specific budget in the festive season just for promotional activities.

According to an estimate, the quarter of October-December accounts for 40% of the yearly advertising revenue by companies.

B Krishna Rao, Senior Category Head, Parle Products, shares, “We are definitely looking at having a presence this festive season. Parle G won’t be active on television much, but on the digital front, we are looking at spending to the tune of 7-8 percent of our media spends around festive times."

So, the focus will be on digital with many customised campaigns during Diwali across YouTube and Facebook till November 15. Rao says, “There will be focused initiatives encompassing the entire set of brands and how we can integrate during Diwali.” The brand will also explore native advertising.

Brands are also hoping that the rural market would be able to add to a stable growth this quarter. According to Mansoor Ali, Chief Sales &Marketing Officer, Hamdard India, “Our products have been doing well in rural markets with regard to annual growth. The main reason behind this is the growth in consumption of rural consumers, deeper within the categories that they already buy and wider into newer and more premium categories."

The potential of rural markets in terms of contributing to the overall sales of a brand is immense today. However, as Ali says, "The behavioral pattern of consumers is different vis-à-vis that of metro cities, which Hamdard ensures is analyzed well before coming out with a product offering."

“Due to consumer loyalty, we have always seen a positive growth for our brands in the rural market and we expect to maintain this in the near future as well," says Pingle.

After the slowdown experienced in the last two years due to demonetisation and GST, this year brands expect the FMCG sector to grow by 13% in 2018, basis the latest Nielsen report. Till October, the sector grew at 9% and the growth in rural areas was 1.7 times more as compared to urban India.

In the June quarter, FMCG sales grew 10.9% from the year earlier. In the last 12 months ended June, it grew 11.6%, nearly 70% of which was driven by consumption volume. The report said, overall stock levels in the retail trade have improved by 10 percentage points since early 2017.

“We are expecting good sales this festive season as during this time consumers tend to spend a certain predefined amount which differs as per each individual's earning. However, the economy may have a sluggish start due to the instability in the rupee, but we are optimistic about the growth and expect the pace to pick up soon,” says Ali.

“Although the beverage category has higher salience in summers, we expect an overall spike in sales through lifestyle and OTC categories in the festive season," Ali added.

To aid purchases by consumers, schemes and discounts do indeed help and looking at the various big day announcements by e-commerce players in India, we can conclude that demand is on a rise, unlike last year. Keeping this in mind, Hamdard's overall marketing budget has grown by 5-10 per cent every year, over the last 5 years. 

"Uncertainties due to demonetisation and GST did impact the process of growth due to the adjustment time the industries took to understand new norms. However, during the festive season, the FMCG sector is expected to grow 12-13 percent in the calendar year 2018. This gives us every reason to be optimistic and we are very hopeful to see a good quarter where the growth and pace will pick up soon," adds Pingle.

Kartikay Mehta,  VP Sales - Unibic foods, is also expecting a good season sale this time, than the last two years. “All external environment is favourable and GST transition is settled now. We are expecting 50% growth over last year during this festival season," he says.

When asked how the business is doing in rural markets, Mehta elaborates, “We are still focused to the Urban business, however for us our rural growth is coming due to penetration and is slightly higher than overall growth. In my view, India is becoming less rural. The new rural definition is less number of stores in any given geography. However the consumption per capita for similar section of people is almost same. This phenomenon is happening very strongly in Southern and developed states of India."

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