IMPACT OF COVID-19 ON FMCG INDUSTRY

A study on impact of COVID- 19 on ​

FMCG industry and consumption of FMCG products by
consumers in Mumbai.

Bhumika Jain, SYBAF

Priya Ghiya, FYBFM

Jai Hind College, A Road, Churchgate, Mumbai, Maharashtra

ABSTRACT

The COVID -19 pandemic hit the global economy, India’s real GDP decelerated to its lowest
in 6 years. One of the major sectors impacted by this is ​fast moving consumer goods
(Fmcg).​​The fast moving consumer goods (Fmcg) sector is an important contributor of the
Indian economy. FMCG products are consumed by all sections of society. The majority of
consumer’s income is spent on these products. This sector has shown amazing growth and
is the fourth largest sector of Indian economy . Because of Covid-19 and announcement of
lockdown lead to increasing demands for FMCG products massively owing to panic buying
by consumers and companies having to increase production. The consumers are likely to
curtail their discretionary spending which would significantly impact the sector’s growth
further. However, if the supply and logistics disruptions are This paper focuses on how
Covid-19 has impacted the FMCG industry and consumption of FMCG products by
consumers in Mumbai.

Objectives

Method:

1. Participants - Participants who participated in our study are people of Mumbai. The
percentage of females in our survey were 68% whereas men were 32%.

2. Research Design: We have used chi square testing to find the hypothesis. The
hypothesis is

H0: The no. of people expenditure increased is independent of the storing necessities during
lockdown.

H1: The no. of people expenditure increased is dependent on the storing necessities during
lockdown.
3. Measures: The collection of primary data was carried out with the help of a questionnaire
through survey method. The secondary data collection is from the internet, magazines and
reference books.

4. Procedure:

Online Google form was created to get the reviews of people on how they are impacted and
then we analysed the results of the questionnaire and gave suggestions .

INTRODUCTION

The Covid-19 has a huge impact on the economy and one of the major impacts is on the
FMCG sector which is the 4th largest sector of India. Because of COVID-19 government
declared a lockdown which has resulted in an increase in demand and consumption of
FMCG products massively. Owing to this panic buying by consumers the companies need to
increase the consumption. Retailers’ supply-chain difficulties have largely arisen as big shifts
in consumer behavior and stepped-up health restrictions have rippled back through their
operations. One noteworthy shift has been an abrupt swing in purchasing patterns. Sales of
non discretionary products like household, food, beverages and personal-care products have
increased, while sales of discretionary items, like furnishings,clothing and footwear have
tailed off.

In order to increase production the key problem is shortage in the workforce. The workers
can’t go on work because of lockdown and the transportation of goods has become difficult
because of restriction in movements by the state government which is disrupting the supply
of products.Workforce is a problem when it comes to manufacturing as well as delivery of the
product.Retailers have started taking measures to keep movement of goods to store shelves
and consumers’ houses.

Retail leaders are trying to create transparency. Also they are working on building
rapid-response capabilities to mitigate the short-term fallout from the crisis.In this research
paper we are focusing on challenges and opportunities faced by the FMCG sector and how
consumers are impacted through it.in this article on the five actions retailers are taking to
resolve the immediate challenges that COVID-19 presents to supply-chain workers,
business partners, and operations. (In a subsequent article, we will examine how supply
chain leaders at retail companies can chart a path to the next normal, building resilience and
returning the supply chain to full effectiveness while reimagining and reforming supply-chain
operations to improve their performance.)

IMPACT OF COVID-19 ON FMCG SECTOR

1.COVID-19 Retail market is a Guerrilla warfare:

Ideally, the normal retailing norms say that the FMCG salesman does a fixed number of
outlets in a day. And now things are very different. Mr. Japheth pointed out that the sales
team had no knowledge of the market during the lockdown. Few retailers have opened their
shops, few haven’t. In this case, identifying and hitting the right retailer is the key.

2.MOM and POP stores are winning the lockdown battle:

Mom and Pop stores or the Kirana stores are winning the battle for their agility. Many
retailers are visiting his depots to collect their orders so that they can meet the demands of
the customer. Super Markets have not been very agile in reacting to this situation. The
retailers are winning the battle by not only keeping the essential commodities but also
delivering the supplies to the end consumers within 4-5 km radius. These gestures will bring
a strong and long term customer loyalty towards them.

3.Consumers are not brand-conscious:

The consumers are not being brand conscious at these times. They are picking up on
availability at the retailer’s end. Having said that, he mentioned that if a consumer is able to
find the brand of their preference - they are buying it in bulk.

4.Managing internal and external communication is the key:

In this time of mayhem, the central government’s directive can be misinterpreted by the state
government and local authorities. There are various instances where local police stopped
the vehicle delivering essential supplies. Renowned FMCG consultant mentioned that in this
event of crisis managing clear communication with the team is essential.

5.Post lockdown Brands will have to take credit exposure:

In order to survive in the market after the lockdown, brands will have to provide credit to their
channels to get the products in the market. This is important otherwise, their competition will
eat on to a big chunk of the market. Post-lockdown priority should be to use credit as a tool
for product placement.

6.Work from home will be the new culture:

FMCG as an industry has been a laggard in promoting work from home but currently they
have no choice but to increase their efficiency using telephonic and web based interactions.
Soon this will become a new culture.

7. Backend Operations are a big hurdle:

The labour supply has stopped and raw materials are scarce. Taking a cue from this point,
packaging material is a huge issue in the current market.The suppliers and labour force is
the only solution that may help in maintaining long term relationships.

8. FMCG Supply Chain will be redefined:

The idea which seems impractical one month back will look seemingly doable. Like for
example using retailers to deliver online subscription services or perhaps using the right tool
to engage key stakeholders of the supply chain.

As we can see the effect on FMCG because of covid-19, this impact will take a considerable
time to erode from the markets and consumer’s minds. The FMCG companies need to
convert these challenges into opportunities for better business models.

Opportunities for FMCG brands amid CoronaVirus Outbreak

It is surely a dark phase for the entire country. The Coronavirus outbreak has undoubtedly
disturbed the Indian economy. Having said that, there are hidden opportunities wherein
brands can capitalize to keep them in good shape amidst the pandemic. It is the best time
for brands to win customer’s trust but they’ve to take certain steps in the right direction.

First of all, all brands should engrave customer-centricity into their business model. The
companies should ensure proper sanitation and disease protection at their brick-and-mortar
outlets. FMCG companies should attract customers to prefer digital shopping over physical
shopping. Furthermore, it is crucial to winning customer’s trust in this rough phase and
brands need to go extra miles for that.

Primary Data

A questionnaire was distributed among 259 people. The questions are as follows:-

1. Did you face any problem with the availability of necessity goods due to the outbreak
of covid – 19 in Mumbai city? (example : food and beverages , toiletries , household
stuff)

2. Did you store any necessity products due to the announcement of the covid – 19
lockdown?
3. Has your expenditure increased on the necessity products due to the covid – 19
lockdown?

4. Do you think that the current production of necessity goods is enough to sustain the
Indian population?
Kai Square Test

H0: The no. of people expenditure increased is independent of the storing necessities during
lockdown.

H1: The no. of people expenditure increased is dependent on the storing necessities during
lockdown.

Level of significance: 5%, Degrees of freedom= (2-1)*(2-1)=1

OBSERVED FREQUENCY TABLE

Expenditure increased/ yes no Grand

storage of necessities Total

yes 121 34 155

no 64 40 104

Grand Total 185 74 259

We can now calculate the value of chi square statistic:

EXPECTED FREQUENCY TABLE

Expenditure increased/ yes no Grand

storage of necessities Total

yes 110.714 44.2857 155

no 74.2857 29.7143 104

Grand Total 185 74 259

(OBSERVED-EXPECTED)^2/EXPECTED

Expenditure increased/ yes no

storage of necessities
 yes 0.955576 2.38894

no 1.42418 3.56044

Chi-Square​= 8.32913

p = 0.00390143

CONCLUSION AND INTERPRETATION: Since, p<.05 there is a significant relationship

between people’s expenditure increasing with the fact that they are storing extra necessities.

Discussion