71% drop in FMCG demand due to Covid-19, zero orders in 95% outlets: Study

The Bizom report has captured insights by analysing data from 30% of the retail space across 400 districts and 2,000 towns and cities; it covers a population of 800 million

As Covid-19 ravages health systems and economies around the world, the lockdown and its accompanying preventive measures in India have deeply impacted the FMCG (fast-moving consumer goods) industry. Indian retailers suffered a significant 71 per cent drop in demand, with no orders received by 95 per cent outlets in the first week of lockdown, according to a report by retail intelligence platform Bizom. It did a consumer spend analysis for the unorganised Indian retail sector.

The report has captured insights by analysing data from about 30 per cent of the retail space across 400 districts and 2,000 towns and cities of India. it covers a  population of 800 million.

For most consumers, the ‘Janata Curfew’ followed by a 21-day lockdown were unprecedented events. But a look at the data shows that retailers anticipated some form of a lockdown long before the Government of India announced it on March 24. In India, traditional channels supply 90 per cent of groceries and daily essentials. Unfortunately, these channels are also unorganised and lack systemic processes for forecasting demand or anticipating surges in demand. However, retailers of such channels rely on their experience and peer groups to predict more accurately than many sophisticated models. Also, consumption as such surges during the many Indian festivals and retailers cue their stocking plans to the festive calendar.

The data from the report shows that Indian retailers did not panic and stockpile. The festive period had just peaked. So retailers had already bought their stock, but their offtake was lukewarm. Also, initially, a few states announced social distancing only as a precautionary measure. The lax approach allowed retailers to anticipate a lockdown and prepare for it before the distribution network came to a standstill.

Beverage fared the worst among all the product categories. The category's peak season is summer and just as it was about to start Covid-19 and the lockdown hit the country. The beverages season typically picks up a week or two before Holi. It did not happen because 90 per cent of the people have been 100 per cent of the time indoors during the lockdown. Also, the offtake for carbonated beverages was impacted by low alcohol consumption since the two are usually paired as a drink.

Confectionery is among the worst-hit categories, just behind Beverages. Sales in this space were down almost 25-35 per cent after Holi and might continue till May end. The decline accelerated at a higher rate than usual. The category is an out-of-home consumption, and when the season ends, retailers will not order again. It has had the worst revival curve among all the categories.

Home Care saw an increase in demand in 04 and 08 weeks due to month-end buying patterns of retailers. A similar increase in demand is seen in 11 week due to Janatha Curfew announcement though the peak came a week early. 

Among all categories, Packaged Food is showing the fastest recovery, while Commodity was the least affected category. Personal Care sales typically peak months because consumers stock grooming and hygiene products once a month. In the week of the Janatha Curfew announcement, retailers did not hoard Personal Care products as much as Commodities and Packaged Foods. Also, Personal Care shows a very low revival curve than expected.

The report says local brands and entrepreneurial Indian Kirana stores have shown resilience, with the recovery of almost 65 per cent by week 3 of the lockdown. Grocers spent 72 per cent of their capital buying commodities in the week of the Janatha Curfew announcement, this is up by 47 per cent up from the normal average.