Most countries are under some degree of lockdown and business is open for essentials items only. There is no accurate, consistent definition of essential but most CPG categories fall under this definition. Let us call them essential brands for lack a better term. So CPG is open for business, but their supply chains were not prepared for this demand and remain patchy at best.
India will be completing the first phase (21 days) of lockdown on April 14, 2020, but the nationwide lockdown might be extended by another 14 days. There are murmurs of restarting some parts of the economy, zoning the districts and gradual exit from the lockdown. Brands have picked up on these conversations and planning for the post-COVID-19 market.
An interesting aspect of today’s scenario is that the environment is uncertain, the demand is somewhat predictable, but consumer behaviour is changing. The consumer are less choosy about their brands and pick up what’s on the shelf. Service is key. So any brand that improves its shelf availability (real or virtual) will win market share. Essentials brands are racing to get their supply chain up and running.
COVID-19 has pushed incumbents to make bold bets and modify the working style to improve service. Here are some interesting trends playing out in the Indian market today.
No last-mile distribution, so go D2C
General Trade (kirana stores) still accounts for 80-85% of CPG sales. So the last-mile, fleet-on-street is critical. As social distancing paradigm kicked-in, this last-mile disappeared - people and transport. Distributors had no or minimal staff, and there was no means to service the stores. Brands are forced are to experiment. Essentials brands are more than willing to partner with anyone who offers last-mile transportation and a human fleet. Food aggregators such as Zomato, Swiggy, Dunzo, seem to fit the use-case. There are models are work.
Last-mile delivery fleet: The last-mile for brands is distributor to kirana. Currently, this last-mile is not functioning well. Partnership with aggregator apps provides the crucial distributor to kirana store link.
D2C: Food aggregators were looking to enter the grocery delivery space. So earlier the better! These hyperlocal platforms have idle capacity (food orders have dropped to the tune of 60-70%) and willingness to help the brands. Brands have setup direct stores within a matter of days - Amul, Marico and Tata conusmer on Zomato. Britannia is working with Dunzo for 1-hour delivery of products.
Distributor points are the new fulfillment centres, and customers get the products delivered at their doorstep. Going D2C was not a strategy before April 2020, it is now a crash course in hyperlocal fulfillment. Insurgent brands who were on the fence have gone D2C - true mostly for perishable food brands.
Private labels take-off - function over brand
Grocery delivery apps are operating at less than 50% capacity, struggling to service the surge in demand. Consumers are literally playing delivery slot poker to checkout their pre-built baskets. So a product now takes precedence over the brand. The result, consumers purchase private label. With an uncertain delivery slot, demand is substituted and not postponed.
So for the incumbents who spend millions on brand availability is vital. So there is a scramble to partner with logistics companies such as Porter, Lynk, Loadshare for hire point-to-point delivery services.
Product Bundles - don’t make the consumer spend time building a basket
Modifying the store layouts to align with the new paradigm of social distancing is no possible right now. Retail stores are trying to observe purchase patterns and creating product bundles which can be ordered or picked-up without waiting for long in the queue.
Bundling is attractive, it simplifies the purchase process and allows streamlined supply chain operations. Also, bundles increase the ticket size every purchase - something aggregator platforms very much like. Bundles can be seen as “solutions”.
For insurgent brands, this may be an excellent opportunity to work with complementary brands to join hands and offer bundles or solutions.
Product launches - get consumer eyeballs on the product, easy trial
Few incumbents are also looking at new launches or improving the visibility of their newer products/ranges. Dabur was not due a hand sanitizer launch for a few months. The company rescheduled the launch to March 2020. Marico is using Saffola Stores on Swiggy to showcase its Fittify range of food products.
It might seem like an odd time to launch/relaunch a product, but right now, the consumer is looking to buy what’s on the shelf. Brands are trying to win the consumer with less competition.
So for both incumbent and insurgent brands, sorry essential brands, it is time to fix the supply chain issues and improve service.
More trends, exciting partnerships will emerge over the next few months. The post-COVID-19 market might be quite different if consumer behaviour and habits change significantly. Trust and hygiene are going to be the critical factors that will drive the purchase decision, which will result in new delivery models and new products.
Edit:
BigBasket at one point had 57 partnership discussions to just get manpower. Capacity and order fulfillment is function of labour availablity, more on this thread.
Caught My Eye
This thread on @twitter.