By Vaishnavi Gupta, Assistant Editor
Jun 27, 2022 / 10 MIN READ
Every day people are coming across baffling options in the food and grocery category like 19-minute delivery. Also, the rising disposable income and the ease of getting things are definitely ensuring that this space will have an appetite for a long.
Consumption is directly related to income and affordability. During the first wave of Covid, the income got disrupted, and post-Covid due to various reasons inflation has gone up. Therefore, it has again corroded affordability and affected food and grocery space in a big way.
Trends Re-shaping the Food and Grocery Space
The COVID-19 pandemic has altered lifestyles across the globe more than ever. Here are some industry trends that are observed currently:
Consumptions of Essentials have Stayed Consistent
The way consumption is outlined over the last couple of years and going forward is need-based. There’s a daily need for the essentials by the consumers, such as groceries, staples, fruits and vegetables, dairy products, etc, irrespective of how the market is doing. If there’s any inflation and increase in prices, people still need fruits and vegetables, groceries, and staples on a daily basis.
Healthy Food has Gained Prominence
With frequent lockdowns and increasing health issues, more people have shifted to healthier lifestyles. While many industries faced huge setbacks because of irregular shifts in consumer demand, consumption has firmly shifted to the health food segment. It has opened doors for the health and hygiene sector, which is doing seemingly well today. “During the pandemic, we saw that when people are picking their daily consumption items, they are starting to become a lot more mindful about what goes into their body. This is the trend that we have seen in the last two years that people have started to buy healthier, clean, and more conscious items going forward,” Gaurav Manchanda, Founder & Managing Director, The Organic World stated.
Less Spend on Imported Grocery Items
In the last couple of years, consumers have also started spending less on imported grocery items like imported chocolates, imported wafers, and imported snacks. “We carry a good range of imported items. We have seen a reduction in the buying of these items. It was a one-time high during the first wave but now the buying has reduced to 10-15 percent,” Yash Agarwal, Executive Director, Ratnadeep Retail Pvt Ltd told.
Reduction in Buying of Beauty Products
Due to the pandemic and work-from-home culture, the consumption of personal beauty products has been reduced. “People are consuming the same amount of food they were consuming earlier. But due to work-from-home, consumers don't need many beauty products. Therefore, we have seen the beauty products range reduce significantly in the last two years,” Agarwal added.
Consumers’ Focus on D2C Brands
According to the recent industry reports, people in the age group between 13-35 years are buying a lot of D2C and new-age brands, wherein these new-age brands are like up to two-fold higher than the legacy brands in terms of the prices and the value of the product. “25 percent of our total sales come from new-age brands,” Mani Dev Gyawali, Co-Founder, The New Shop said.
Inclination Towards Transparency
Post-Covid, people started aligning themselves with the brand. They wanted traceability, transparency, and quality more than anything. “99 percent of chicken is consumed from retail. 90 percent of the market is actually a live chicken market, where you actually go to the butcher, pick a live animal, and they'll slaughter it for you. This shifted post-Covid as people’s perceptions got changed. They wanted quality and to stand by a brand. Therefore, we saw a huge shift from a live butchery in our stores. We are growing healthily about 10 percent month-on-month,” Narendra Pasuparthy, Chief Farmer, CEO & Founder, Nandu’s told.
How FMCG Companies Tackle Inflation
FMCG companies have their playbook in terms of how to tackle inflation. Firstly, they can deal with it by reducing the grammage of the product. Secondly, they create bridge packs. For instance, the company offers Rs 10 or Rs 20 pack, but during inflation, it can create a pack between Rs 12-15. “So during high inflation period, companies can remove the smaller pack and they get the customer to upgrade to Rs 12-15 pack. Hence, these are the playbooks which organizations have already created to tackle inflation,” Seshu Kumar, National Head, BigBasket said.
Inflation affects different segments of populations in different ways. In certain categories, customers would like to buy some aspirational products, but typically they find that the aspirational product is almost double the price of a regular product. For instance, in juices, there are cold-pressed juices that are higher in price. Similarly, in the case of oils, there are cold-pressed oils. Therefore, people think that these products are healthier so they should buy them. But in a normal course of time, when they come to purchase these products, they would find that they are about two to three times more expensive than the normal product. But during periods of high inflation, when they find that this product is almost as cheap as the regular product so they can actually make the decision of upgrading themselves to these products much easier.
“There are standard notions that during inflation customers downgrade but there are also places where customers upgrade because upgrading becomes very easy during high inflation rate periods, where the product, which is cheaper, actually the increase in price will be a lot higher than compared to the more expensive product,” Kumar explained.
“Additionally, during inflation, consumers are more inclined towards smaller pack sizes. We sell packs of 250 or 500 grams more, compared to a 1 kg price,” Agarwal said.
The Role of Quick Commerce
When we reimagine commerce both food and grocery in the new world, we cannot ignore quick commerce because we've seen everyone trying to ride this wave falling off.
Quick commerce is possible only with limited SKUs; it can’t be done with the complete portfolio. “Every company has a limited set of key SKUs of about 500-1000 that can be serviced in about 10 minutes with dark stores or warehouses. Now for those 500-1000 SKUs in the quick service model, there has to be a specific market fit. If you look at quick service across macro markets, it might not be relevant but with micro-markets, it will be specific, relevant, and able to achieve sustainability,” Manchanda stated.
Quick Commerce is mainly about convenience. “It is the future of commerce. There's no denying that quick commerce won’t be a thing but I don't think 10 minutes will be the norm. I think it'll be 20-25 minutes. It is possible to be sustainable in that model because of the kind of scalability it brings, and the opportunity to target so many customers without having them enter the shop, that opportunity is huge. And I think we are seeing that it's just a nascent stage of companies leveraging up on that,” Manchanda further added.
“Quick commerce is basically the Kirana store; either you tie up with the store or you set up a small supermarket and keep about 2000 SKUs, and then you deliver them within 10-20 minutes. The thing should be convenient for delivery. 10 minutes is probably a word but later it may evolve to 20 or 30 minutes. Still, anything which is below one hour, a customer finds it more comfortable to order and that's how the market gets organized,” Kumar concluded.
Every day people are coming across baffling options in the food and grocery category like 19-minute delivery. Also, the rising disposable income and the ease of getting things are definitely ensuring that this space will have an appetite for a long.
Consumption is directly related to income and affordability. During the first wave of Covid, the income got disrupted, and post-Covid due to various reasons inflation has gone up. Therefore, it has again corroded affordability and affected food and grocery space in a big way.
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