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Wednesday, September 30, 2020
Home Blogs Consumer product companies looking at a brighter post-Covid-19 future

Consumer product companies looking at a brighter post-Covid-19 future




In the past few months, the Covid-19 pandemic has severely impacted most industries, with significant disruption in their day-to-day business operations. Consumer product companies have not been spared, either, as the crisis has impacted several consumption categories, including discretionary goods like appliances and alcoholic drinks. On the other hand, largely essential categories like grocery staples, packaged foods, home and hygiene products have continued to see high demand.


Shift in consumer behaviour



The pandemic has caused a shift in consumer behaviour, some temporary and some that will have a long-term effect. According to EY’s latest survey of 1,046 Indian consumers titled Future Consumer Index, that is conducted monthly to gauge the shifting consumer sentiments, the Covid-19 crisis is being defined by four distinct consumer behaviour segments – “Hibernate and spend”, “Cut deep,” “Save and stockpile” and “Stay calm, carry on”.


Consumers that fall into the “Cut deep” group (35%) are significantly impacted by the pandemic as it has affected their employment status; while those representing the “Save and stockpile” group (25%) are worried about their families, less optimistic about the future and have been stockpiling essentials. Most consumers (38%) represent the “Hibernate and spend” group, who are concerned about the pandemic but are also the best positioned to deal with it; on the other hand, the “Stay calm, carry on” group (2%) are the least impacted and are expected to resume their old shopping behaviours.


The four segments identified could morph into five very different ones as the pandemic subsides, i.e. “Back with a bang” (38%), “Stay frugal” (29%), “Keep cutting” (19%), “Cautiously extravagant” (11%) and “Get to normal” (2%). For example, most consumers in the “Hibernate and spend” group will migrate to “Back with a bang” group as they are waiting to get back out and spend on shopping. About 69% of the consumers from the “Back with a bang” group expect to be better off financially over the next one-year. Similarly, consumers in the “Cut deep” group will either “Stay frugal” or “Keep cutting” their expenditure on all categories except groceries. While this indicates some amount of optimism post-Covid-19, it also indicates the caution that many consumers would adopt to their lifestyle in the future.


Challenges that companies are facing


The biggest challenge for companies would be to build an organisation that’s sufficiently resilient and at the same time flexible to cater to the changing demand landscape. Most consumer product companies have never seen such rapid change in consumer behaviour and the market landscape leaving the management with no past learning to lean on. This also poses a challenge to look at multiple aspects of the business simultaneously like organization structure, product portfolio, and supply chain resilience.


Strategies to overcome challenges, path to recovery and the outlook for H2, 2020


Given the evolving external environment and resultant shift in consumer behaviour, companies would need to think long term and plan to be ready for the “Beyond” phase of the pandemic. The consumer studies also offer some clues on the strategies they need to adopt. One of the changes the boards need to make is to balance long term strategies with a framework of tactical planning that can be adapted quickly in case of changes in the market. Having a holistic approach to risk management is yet another crucial step. Companies must use scenario modelling to plan different response strategies, develop checklist to monitor implementation and leverage analytics to uncover potential risks and timely management of disruptions.


Communicating safety and hygiene of products will be the first step in winning trust of consumers. In the long-term, companies should re-align brands towards purpose, review product portfolio and invest in developing new categories, which are relevant for their consumers. Some of the other measures include expanding relationships with third-party e-commerce platforms and other multi-level tie-ups such as B2B delivery aggregators, making provisions to extend financial support to its channel partners, permanent safety measures in offices and on shop floors, exploring shared warehousing, and leverage emerging consumer trends that have accelerated as a result of the pandemic to expand their product portfolio (e.g. precooked /semi cooked/ assembled recipes, and DIY products). Companies must create value across the new ecosystem especially with the hyperlocal ecosystem including not just kiranas but also looking at RWAs, societies and colonies as important influencers in product purchase.


Companies should also consider this an opportunity to accelerate their digital transformation strategies, be it investing in latest technologies to bring in more organisational efficiency, gathering better consumer insights or improving systems and processes in the entire value chain as discussed above.


Going forward, the comparatively less spread of the Covid-19 virus in the semi-urban and rural segments as compared to metros/urban areas and unlocking of the economy are some of the reasons for the bounce back of companies. In in the next 6 months, I anticipate a much faster recovery in the rural markets, also because consumers may have been habituated to increased personal hygiene and home cleaning, which in turn opens up wider avenues of growth for the consumer products companies in the form of a special sanitation and hygiene products portfolio.


In addition to that, deeper internet penetration in rural markets, uptake/rise in agriculture on the back of normal rainfall and ease of liquidity in the rural economy, will lead the next phase of growth post the pandemic. Having said that, with the festive season coming up and slowing opening of the economy, consumption in urban and semi-urban markets is also expected to bounce back in the coming months. In the meantime, consumer products companies must take all measures to enhance their resilience to withstand any future disruption.




The writer is Partner and National Leader, Consumer Products and Retail, EY India





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