According to a recent Nielsen report, eCommerce is anticipated to represent 11% of FMCG sales by 2030, an eightfold increase from the current level.
This evolution isn't just about e-commerce overtaking modern trade; it's also about the transformation of general trade channels, as kiranas in urban areas are likely to adopt more modern store-like appearances, embracing digital payments and direct ordering from FMCG brands.
Significantly, direct ordering and e-commerce platforms have fueled substantial sales growth for FMCG companies, such as Hindustan Unilever and Tata Consumer, where digital sales accounted for a substantial portion of their revenue.
Additionally, collaborations with various digital platforms offer increased coverage for deliveries, convenient options, and access to products that might be challenging to find offline, intensifying the appeal of FMCG businesses in the digital real.
Finally, the social commerce channel will see robust growth in the coming years, recording a CAGR of 62.4% during 2022-2028: as the number of internet and social media users surges. Social media will likely become a vital shopping platform as they allow for more customized offers and target-specific ads, thanks to the high volume of user data collected by social media apps.
Trend 5: Industry structure gets shaped by new and existing players
The FMCG industry is going through a structural change with the entry of the new type of players and consolidation by the incumbent players,
In particular, three types of players are emerging: Mavericks - companies with a completely non-traditional background, scalers- those to spread their wings beyond their private labels and acquirers, looking to consolidate their position further.
On the sidelines until a decade, Patanjali has seen a meteoric rise since then. The company’s Food and FMCG business revenue jumped almost four-fold to ₹6,218 crore in the 2022-23 fiscal, from ₹1,683 crore in the previous year.
The company has grown with a different business model on the back of natural products. As it prepares for the next stage of growth through listing multiple companies, the industry will witness a new type of competition to deal with.
Reliance also announced its plans to enter the FMCG market earlier this year, focusing on small packs grocery segments, with diversification plans coming gradually.
Reliance’s entry into the FMCG market will be through M&A, with plans on acquiring multiple FMCG brands to accompany its developing modern trade stores; these possible acquisitions include F&B brands Garden Namkeens, Lahori Zeera and Bindu Beverages.
As new firms continue to reshape the market, existing FMCG players have merged with or acquired other brands to enter new markets or to increase their portfolios in areas where they are already present.
For example, Nestle India bought Purina Care India, and Emami bought 30% of pet care startup Canis Lupus Services India.
Trend 6: Millennials and GenZ become the main actors
As Gen Z and Millenials account for a growing part of the population estimated to comprise 50% of India's population by 2030), their consumption habits and preferences are becoming mainstream. Among them is a liking for quick deliveries and convenience, an increasing digital savviness and a desire for healthier products.
The requirement for quick deliveries is especially true for the convenience of having the product delivered at home or available at your doorstep; after having experienced these new channels during the pandemic, the consumers are more likely to use them than post-pandemic. Especially for groceries, 42 per cent of shoppers across all age groups, say that delivery and fulfilment are the most important service attributes.
Millennials and Gen Z are also far more challenging to reach through old-fashioned marketing campaigns: 84% of Millennials don’t trust traditional advertising; they are far more sensitive to experiences than hard sells.
Gen-Z consumers are far more sensitive to money-saving opportunities (as they are less confident about the future and tend to check their bank balance more frequently) and socially and environmentally engaged companies.
61% of Gen Zs believe brands are better positioned than governments to solve social problems. They also prefer buying Indian products: 92% of Indians have reported purchasing local products over imported ones.
More consumers will compare different options before buying, thanks to the increased online information. They will also be more attentive to the information displayed on the packaging (“knowing before buying” behaviour)
In B2C, 81% of customers research online before buying non-routine items, while in B2B, 92% of purchasing decisions commence with an online digital search.
Health will remain a consumer concern in the FMCG Market: in F&B, dietary preferences will shift towards organic/vegan products, driving sales of health & nutrition-focus brands. Consumers will prefer branded products as they are perceived to be associated with better quality, safety and health benefits.
Forty four per cent of consumers are willing to pay a premium for grocery products that have sustainable packaging. This is more pronounced amongst Gen Z (64 per cent) and millennials (54 per cent) than older generations like boomers (30 per cent).
Trend 7: Consumers to get older and wealthier
By the year 2050, India will have a notably larger mid-age population. They will likely have more purchasing power (being a family and not single households) and will buy according to their life-cycle stages: couples typically buy more durable goods, parents buy children or family-related products, and their expenses in-home care/ personal care increase towards family-sized packs; finally when children leave the nest, the revenue of the parents stabilize, and they can spend more on luxury/health related items.