Written By Devika Singh
With restaurants shut and online food ordering not inspiring confidence yet, consumers are turning to comfort foods such as cakes, biscuits and ice-creams. For instance, Metro Cash & Carry witnessed more than 50% growth in the biscuits and snacks category, when the country entered its third phase of lockdown in May, as compared to the pre-Covid period. It also recorded an incremental demand for ice-creams and premium chocolates during the period. Amul, too, has seen an increase in demand for its chocolates, biscuits and Indian sweets.
Experts say the fact that these products are affordable has also fuelled the demand. “Historically, comfort foods have done well in times of crises, as they are small purchases, and don’t put a strain on the consumer’s pocket. These categories did well even during the 2008 recession, globally,” says Rajat Tuli, principal, Kearney. In fact, the consultancy firm’s consumer survey conducted in May suggests that 70% respondents intended to spend on indulgences, including food, going ahead.
Although the demand for these products is up significantly, FMCG companies are struggling with limited production capacity and supply chain hurdles.
Looking to indulge
Amul claims to have seen a record jump (30-40%) in the sales of chocolates and ras malai during the current period, and has also tied up with Swiggy and Zomato to deliver the same to customers. However, meeting the demand for ice-creams has been a sore point.
RS Sodhi, managing director of Gujarat Cooperative Milk Marketing Federation, which manages brand Amul, says, “Though we have witnessed a demand for ice-creams and our family packs sold well wherever we made them available, the overall sales have declined as compared to last year. In March, we saw a fall of 95% over the corresponding period last year, but it improved marginally to 85% in April.”
Sodhi says Amul is facing issues with local authorities in a few locations, as they are not treating ice-cream under the essentials category, “even though the central government’s policy mentions that all food categories are to be considered as essentials”.
Amul has doubled its advertising spends in this period. The company has brought back its ads from the ‘90s and was airing them with reruns of Ramayan and Mahabharat on Doordarshan.
Mondelez India, which manufactures Cadbury Dairy Milk and Oreo, has also tied up with Swiggy and Dunzo. The company started servicing 400 hypermarkets directly, to reach out to consumers quicker, and has launched Oreo Jumbo, in 500 gm packs, so that consumers can store the product for a longer time.
“Consumers are now increasingly looking at ways to create experiences within the comfort of their homes. To ensure that our products reach consumers, we are trying our best to maintain good service levels, so that they continue to feature on the shelves of every retailer,” says a Mondelez India spokesperson.
Experts foresee further growth in these categories as economic activities resume and production stabilises. “Consumers might stem their big purchases for the foreseeable future, and they would need something to alleviate stress. Therefore, these categories might see further growth in the next two-three quarters,” says Tuli of Kearney.
He adds that companies could tap this opportunity by bringing down the prices of their products marginally, to make them more affordable, or by making them healthier without compromising on the taste.
Because the surge in demand for these products could be partially attributed to restaurants and movie theatres being unoperational, Devangshu Dutta, CEO, Third Eyesight, believes it is here to stay. “Since they are going to remain closed for some time, these brands will have to leverage e-commerce and traditional retail to further their reach,” he adds.
Written By Samreen Ahmad & Peerzada Abrar
Digital payments platforms are witnessing a spike in e-commerce transactions
At a time when the corporate world is seeing layoffs and salary cuts due to the Covid-19 outbreak and the nationwide lockdown, several ecommerce firms are on a hiring spree for their warehouses and delivery positions to fulfil the rising online demand for products.
Amazon India on Friday said that it has created close to 50,000 seasonal jobs in order to be able to effectively serve its customers and meet the surge in demand as customers are banking on its platform for their safety during the time of the Covid-19 pandemic.
These jobs, which are temporary in nature, are for a variety of roles at the e-commerce major’s fulfilment centres and delivery network, including part-time flexible work opportunities as independent contractors with Amazon Flex. “One thing we’ve learned from the Covid-19 pandemic is how important a role Amazon and e-commerce can play for our customers as much as for small businesses and the economy.
We take this responsibility seriously, and we’re proud of the work our teams are doing to help small and other businesses deliver to our customers through this difficult time,” said Akhil Saxena, VP, Customer Fulfilment Operations, APAC, MENA & LATAM, Amazon.
As India continues to maintain social distancing to fight the ongoing Covid-19 pandemic, Amazon India said it firmly believes it has a unique role to play in providing a critical service for the community. This includes helping them get the items they need for their families without leaving their homes.
While creating these job opportunities, Amazon said it remains committed to the health and safety of its associates, partners, employees, and customers, and has implemented a number of measures towards their well-being.
Early this year during India visit of Amazon founder and CEO Jeff Bezos, the company said it planned to create 1 million jobs in India by 2025 through continued investments in technology, infrastructure, and its logistics network. These will be in addition to the 700,000 jobs Amazon’s investments have enabled over the past six years in India.
Amazon has so far committed $6.5 billion to the India market, including $1 billion announced by Bezos in January this year, to tap the e-commerce market in the country.
Other e-commerce players are also on a hiring spree to meet the surge in demand as people prefer to confine themselves at home during the pandemic. E-grocery start-up Bigbasket which had announced hiring 10,000 executives for its warehouses and last-mile delivery said that the last two months have been very critical in terms of managing the manpower requirement.” Our regional teams have been aggressively hiring using multiple channels. In most of the locations we have been able to bridge the gap and have hired people,” said Tanuja Tewari, Vice President-Human Resources, BigBasket. Another e-grocer Grofers is also employing an additional 2,000 people from the industries which have been deeply impacted by the Covid-19 crisis such as textile, manufacturing, and services.
In view of the rapid growth in orders, Gurugram based Snapdeal too is working closely with logistics partners towards creation of additional delivery capacity to handle the increase in demand. “This will include new hiring by our partners while we are also encouraging delivery staff on leave to resume work,” said a company spokesperson.
Online pharmacies are also resorting to aggressive hiring in order to cater to the rising demands. While Gurugram-based 1 mg is immediately looking to hire 1,000 people over the next 2-3 months, Bengaluru-headquartered Medlife is working towards filling up 400 open positions mostly for last-mile deliveries and warehouse management.
As dependence on getting things delivered home will continue, experts feel this would create job opportunities at least for the blue-collared workforce.
“E-commerce and retailers do hire temporary workers to handle seasonal peaks. This is a non-seasonal peak but was expected as there is a lot of pent-up demand as people had only access to essential products till now,” said Devangshu Dutta, chief executive of management consulting firm Third Eyesight. He, however, added that largely India still shops offline but there is a growth in online shopping as the concept of social distancing is in favour of e-commerce
“Until a vaccine is found (for Covid-19) and even beyond that, there will be a huge surge of opportunities for blue-collared workers as customers will be uncomfortable going to stores to try and buy, or even for eating out,” said Pinakiranjan Mishra, partner and national leader, consumer products and retail at EY India.
With the lockdown situation starting to slightly ease out in different parts of the country, digital payments platforms are witnessing a spike in transactions in the last few days, particularly in e-commerce. “On our platform, we saw that the transactions in e-commerce (including transactions for non-essentials) increased by 25 per cent in a week’s time (between May 11-18, as compared to May 3-10),” said Harshil Mathur, CEO and Co-founder, Razorpay. “Also, the usually hailing payment methods like UPI and Cards grew by about 30 per cent and 18 per cent, respectively, indicating that the spending patterns are getting back to normalcy.”
According to data analytics firm GlobalData, Covid-19 pandemic will accelerate the growth of India’s e-commerce market taking it to about Rs 700,000 crore by 2023.
Written By Manu Kaushik
Reliance Industries has been raking in large deals when corporations are struggling to survive – all with a bigger plan in mind, which can even propel Mukesh Ambani into the trillionaire club
How do you kill two birds with one stone? Ask Mukesh Ambani, the Chairman and Managing Director of Reliance Industries (RIL). As global corporations are fighting a survival battle, Ambani has managed to pull off four large deals with Facebook, General Atlantic, Silver Lake, and Vista Equity Partners in the past few weeks. Through these investments, Reliance has raised a whopping Rs 67,195 crore – a large chunk of which will go to retire RIL’s huge debt. Simultaneously, the deals have also propelled RIL’s next growth phase: the $700-billion ‘new commerce’ opportunity.
In July 2018 when Ambani first announced the ‘new commerce’ venture, he said that it has the potential to redefine retailing in India and become one of the biggest new growth engines for Reliance in the years to come. Essentially, new commerce is an integration of RIL’s digital and physical marketplaces, and the idea is to leverage the company’s entire distribution stack to tap the large universe of MSMEs, farmers, and kiranas. With the Facebook deal, Ambani expects to leverage the wide reach of Facebook-owned WhatsApp to speed up the new commerce business.
So while Reliance has many apparent upsides from the deals, what’s in it for its four global partners? The deals with General Atlantic, Silver Lake and Vista are more strategic that could benefit them if the valuations rise in the future as more investors join the Jio party. The partnership with Facebook, on the other hand, is deeper because it intends to explore mutual opportunities in areas like e-commerce and the offline-to-online (O2O) segment which has suddenly been gaining traction in the COVID-19 situation. It’s clear that the stakes are really high for Facebook as compared to the other three, but in a way, they will all benefit if Ambani could execute his plans.
The Repositioning Game
The last two years have been particularly life-changing for Reliance Jio. How? After setting up a large 4G network across the country covering nearly 98 per cent of the population, Jio began acquiring (and partnering with) tech-focussed companies to enhance capabilities in areas like AI, IoT, 5G, robotics and drones.
More than a dozen investments have been made – ranging from a few hundred crore to Rs 700 crore for AI firm Haptik – with a single aim: to reposition Jio as a digital company rather than just a plain-vanilla telecom operator.
This aim also dovetails into Ambani’s larger goal of moving RIL away from being an energy-focussed company. For years, RIL was perceived as an oil and gas major which doesn’t have the ability to run a consumer business. In 2018, it started efforts to change that notion when the company embarked on a mission to earn over 50 per cent of its revenues from consumer-facing businesses in the next 10 years.
RIL entered the retail space in 2006 and the telecom business in 2010, the perception didn’t change until recently (in 2019) when Reliance Retail became the largest retailer in the country, and Jio surpassed the incumbents in terms of subscribers numbers. Though in terms of revenues, the consumers businesses (telecom and retail) account for 29 per cent of the overall revenues, their contribution is likely to cross 40 per cent in FY21, and even higher in the subsequent years.
“These deals will help RIL reposition itself as a consumer/technology company,” said a May 8 report by Axis Capital. “The recent round of investments has further cemented RIL’s resolve to build upon the repositioning plank,” says a telecom analyst.
But what’s the need to reposition RIL as a consumers+tech company? In the words of RIL CFO Alok Agarwal, the repositioning exercise has huge benefits. How? In the recent earnings call, Agarwal said that three tech companies in the world command a market capitalisation of $1 trillion each. In comparison, all the energy companies don’t even have a combined market cap of $600 billion. “So essentially, investors have taken to the tech and consumer companies – Amazon, Apple, Microsoft, etc – as new investment themes,” he said. At an enterprise value of $74 billion (assuming exchange rate of Rs 70 per dollar), Jio Platforms (the RIL subsidiary where the deals are happening) seems to be marching in that direction but it still has a long way to go.
A recent report by Comparisun, an advice platform for small businesses, says Ambani could leapfrog into the trillionaire club by 2033, following Amazon’s Jeff Bezos, Alibaba’s Jack Ma, and two more tycoons.
RIL has indicated that Facebook’s investment is just 50 per cent of the targeted “value unlocking” that RIL has in mind for Jio Platforms. Given that Jio Platforms has emerged as the new poster boy in the tech world, more global investors would be considering buying a piece of it.
Hong Kong-based brokerage firm CLSA says there are 11 tech companies in the world with over $5 billion of net cash position, including Apple, Alphabet, Alibaba and Microsoft, who could potentially invest in Jio Platforms going forward. That means that if more global investors buy RIL’s repositioning story at higher valuation (as it has happened with General Atlantic, Vista and Silver Lake), the benefits will be reaped by all the existing shareholders.
How Facebook Got Lured In
Much like RIL, Facebook has not been satisfied with its current state. Despite earning a large chunk of its revenue from advertising (98.5 per cent), Facebook has been actively pursuing opportunities in the e-commerce space for the past four-odd years. Going back to its history, the social media giant focussed on building products for the first 12 years of its existence, and made itself a preferred ad platform for brands. But in 2016, it rolled out a consumer-to-consumer platform (Facebook Marketplace) followed by the ‘Checkout’ feature that lets users complete the transaction within the app.
Most recently, it has gone a step ahead with a new feature, Facebook Shops that allows businesses, particularly smaller ones, to sell their products right on the Facebook and Instagram platforms. While Facebook will earn ad revenues from these businesses, it can also earn commissions for facilitating payments. This is definitely a deeper engagement from Marketplace feature that allowed just listing, and advertising of products by sellers on Facebook. Of course, the idea to introduce Shops is to accelerate the e-commerce business since the existing Marketplace and Checkout features haven’t really done well.
With Jio partnership, Facebook has set its sights on the growing Indian e-commerce and O2O markets. The tie-up is an extension of a half-hearted attempt made by Facebook last June with an investment in start-up Meesho that enables resellers and individuals to connect with buyers on social media platforms like Facebook and WhatsApp.
Analysts say that India is a large market for Facebook given the large user base on both Facebook (328 million) and WhatsApp (400 million). It’s one of the most attractive markets to establish e-commerce presence given the vast demographic potential and absence of a single large established player. Currently, Amazon and Flipkart are two leading online players but their share is rather small in the overall retail pie. “There is no large established e-commerce player in India which is strong in O2O model,” said a recent report from Credit Suisse.
For Facebook, the reason to invest in Jio Platforms is five-fold: to mine the data of Jio’s 388-million subscribers, strengthen its e-commerce plans, push its WhatsApp platform for payments and businesses, tide over regulatory challenges, and using Jio’s telecom infra backbone to rollout new-age products – Oculus VR and enterprise solutions.
For instance, WhatsApp business account is currently being used by a lot of online service providers such as MakeMyTrip and Lenskart to communicate with their customers. WhatsApp charges for every message sent to the user. With its integration into JioMart (a Reliance Retail subsidiary), WhatsApp can tap a large number of local kiranas and small and medium businesses (SMBs) to use its paid service to communicate with their customers. Thus, it translates into additional revenues for Facebook.
Raja Lahiri, partner at Grant Thornton says that an investor, through RIL, gets a platform and a funnel to the entire consumers, telecom, retail, and internet space in India. “Global investors understand the impact of RIL in India, and that it knows the local market well which will help them to participate in the digital opportunity here,” he says. Indeed, one of the key reasons for Facebook’s investment in Jio Platforms was to bring onboard a strong local partner who can help it solve the regulatory puzzle. For more than two years, Facebook-owned WhatsApp has been struggling for approval for a full-fledged rollout of its payments service, WhatsApp Pay.
Though experts say that there could be a potential friction between Facebook and RIL since they are both going after the same set of SMEs and merchants to build scale for their e-commerce portfolio. In the current arrangement, RIL’s offline strengths (with Reliance Retail) and Facebook’s vast online reach (with WhatsApp and Facebook) have got the partners together. But at some point, there would reach a point where RIL may feel threatened by Facebook’s access to its SMEs and merchant base given that Facebook is going aggressive on its e-commerce vertical.
Taking on Amazon and Flipkart
Even though Amazon and Flipkart are leading the domestic online e-commerce space; their share is rather tiny in the overall retail pie. That’s because around 88 per cent of the domestic retail sector is unorganised and just about 4 per cent is e-tailing, according to an August 2019 report by CARE Ratings. Most large online retailers work on the marketplace model, and a bulk of fulfilment is done through a handful of merchants.
But that could potentially change if JioMart’s O2O model actually works. Take a look at the grocery (kirana) segment that JioMart plans to tap first. About 97 per cent of the grocery segment in India is unorganised. Grocery segment is important because it accounts for over 50 per cent of the monthly wallet share, especially for the middle- and lower-income consumers.
So while Amazon, Flipkart, Future Group, D-Mart, BigBasket and others are fighting for 3 per cent grocery share, Ambani is going after the bigger pie. And he’s going to leverage the offline and online reach of Jio and Reliance Retail to connect the last-mile kirana merchant with a bigger audience.
Thus far, JioMart has rolled out grocery services in three neighbourhoods of Mumbai – Kalyan, Navi Mumbai and Thane – to deliver daily consumption items such as staples, soaps, shampoos and household items. Ultimately, the target is to tap 30 million kiranas across the country in addition to 60 million MSMEs and 120 million farmers.
Devangshu Dutta, founder of Third Eyesight, a consulting firm focussed on retail and consumer products, says that for any large corporate to grow in retail, grocery is the most important segment. Other experts say that grocery, though large, is a low-hanging fruit. More retail segments like medicine distribution, fashion and lifestyle stores, and food delivery are likely to be explored later.
But there’s more to it. RIL is known for its backward integration capabilities from its early days. Starting as a textile player, RIL has moved backwards into the value chain over the years – from polyester to petrochemicals and refinery.
It has replicated a similar strategy in the retail business where it’s sourcing groceries from a large number of farmers and small vendors in a farm-to-fork model. The direct sourcing of groceries could enable Reliance Retail to get into high-margin private labels business. The experience in the retail business is likely to be leveraged to benefit partner kirana stores by bringing down their cost of procurement, etc.
“There are multiple opportunities for Facebook and RIL. But I see businesses with less friction picking up first. It might start with integrated digital payments, and over a period of time, when there’s a visibility of the merchants’ credit profile, new lending products can be created. As such, small merchants like kiranas don’t have enough financing options,” says Dutta.
“Additional synergies are expected to arrive in the form of Reliance Retail pushing its margin-accretive private label products to these (kirana) stores and providing easy credit terms,” said analysts at Motilal Oswal in a recent report.
The next big frontier that RIL would tap is SMEs. In India, there are over 50 million SME units that account for 37.5 per cent to the country’s GDP. For RIL, the opportunities are two-fold: digitise these SMEs and provide them lending facilities. For instance, as per Cisco India, 70 per cent of these SMEs are offline. With Facebook’s digital tools coupled with RIL’s in-house capabilities, a large number of these SMEs can be digitised.
Then, as per ratings agency CRISIL, SMEs accounted for 25 per cent of the corporate lending in the country in FY19. The current lending to SMEs stands at over Rs 17 lakh crore. With data mining tools, and access to other high-quality data, Jio can develop new revenue stream of lending to these small businesses. It already holds a payments bank licence (with SBI) but it hasn’t been able to make good use of it. With millions of merchants and farmers on its platform, it could create a bouquet of services around loans, insurance and mutual funds.
Even as these investments seem like a valuation game at the moment, the task before Ambani to make his ‘new commerce’ gambit work is going to be daunting. Since the nuts and bolts of Facebook deal are yet to come out, it’s safe to assume that there will be moments of conflicts between the partners. But then, if the potential market to tap is huge – bigger than the one currently catered by Amazons, Flipkarts and Future Groups of the world – there will be immense room for growth.
Written By Devika Singh
According to Nielsen, the share of the top three hand sanitiser brands dropped from 85% in January and February to 39% in March, after 152 new players entered the segment
According to a recent report by Nielsen, the demand for hand sanitisers in the country went up by 340% in March, as compared to 24% in the months of December, January and February. The demand for handwash increased by 60% and floor cleaners by 24% in March, in comparison to the pre-pandemic period, the report says.
This surge in demand has attracted companies from across sectors.
The extent of activity in this segment can be gauged from Nielsen’s findings that show that the share of the top three hand sanitiser brands dropped from 85% in January and February to 39% in March, after 152 new players entered the segment.
Is it just a short-term strategy for these companies that have recently forayed in the segment or are they in it for the long haul?
Priti A Sureka, director, Emami, says the company has big plans. “We believe that increased hygiene consciousness is here to stay with significant consumer behavioural shifts. The launch of the hand sanitiser is a natural extension of the BoroPlus brand, and we have plans to offer more hygiene options solving different consumer problems in the coming days,” she says.
Marico and CavinKare have already started diversifying their hygiene and wellness portfolios. Marico, besides sanitisers, has also introduced a vegetable cleaner brand, Veggie Clean, in the market. “While hand, body, home and kitchen hygiene are in practice, the sanitation of fresh produce is still limited to only rinsing them with water. To bridge this gap, we launched a fruit and vegetable cleaner,” says Koshy George, chief marketing officer, Marico.
CavinKare, meanwhile, has launched gadget and surface disinfectants under the Bacto-V brand. Positioning its hand sanitisers for the masses, the company has also launched sanitiser sachets for as low as Re 1.
“There is a need for this category to move away from premium users to masses, and hence we introduced sanitisers in sachets. This is our attempt to democratise the category,” says Venkatesh Vijayaraghavan, director and chief executive officer – personal care and alliances, CavinKare.
The companies are retailing these products across channels — general trade, modern trade and e-commerce, and are relying on digital media for marketing.
Long term effect
The demand for hygiene products, although at its peak currently, will not fade away soon, experts believe. However, Ankur Bisen, senior vice president, retail and consumer, Technopak Advisors, says companies must exercise restraint. “These brands must take one step at a time, and evaluate what the new normal is and how much they should bet on this category.”
Companies with a strong presence in the non-food FMCG category stand to gain far more than the rest. “Companies that have high brand value, good distribution and reach, are on retailers’ minds and have accessible shelf space are likely to make more out of this emerging segment,” says Devangshu Dutta, CEO, Third Eyesight.
However, he adds, this necessitates that companies have enough capital to support the segment for the next six months. “Some of these products are a result of the gold rush mentality; some companies are trying to gain out of this opportunity and will disappear in some time, because the business needs investment,” Dutta adds.
Written By Pavan Lall
As ayurvedic formulations get a renewed push in the fight against Covid-19, can one of the oldest players in the segment step up its game?
The company is extending Brand Dabur into two different categories, home-care and personal care with an emphasis on products that boost immunity
Over the past few weeks the AYUSH ministry has stepped up its thrust towards ayurvedic cures and natural immunity boosters and a host of companies, large and small, have jumped in with special products or revamped age-old formulations that offer strength and vitality against a killer-virus. And Dabur, once the only major purveyor of branded ayurveda-based products in the country is doing the same, while it looks to regain its positioning leverage to keep the brand abreast of the times.