Convenience, virus fear accelerate online sales, despite lockdown ending

India’s leading fast moving consumer goods companies such as Nestle, HUL, Parle Products, Amul, Reckitt Benckiser and Marico reported their highest ever online sales in the September quarter, as consumers continued to shop for grocery online despite lockdowns ending.

Hindustan Unilever, the barometer for grocery demand in the country, said share of e-commerce to its total sales volume is close to 6% now compared to 3% in 2019, while the country’s largest packaged foods maker Nestle said online retail contributed 4% of its domestic sales in the September quarter. “We continued our strong performance in e-commerce channels, which grew by 97% and now contributes about 4% of domestic sales,” said Suresh Narayanan, Nestle chairman. The maker of Maggi noodles and ketchup and Munch and KitKat chocolate said sales were fuelled by double-digit growth across its core brands.

“Consumers who began switching to online grocery shopping in peak lockdown months are unlikely to revert to supermarkets anytime soon, because of convenience and continued concerns about going to physical stores. Secondly, there is an entirely new set of consumers and categories which are fuelling online grocery sales,” said Mayank Shah, senior category head at Parle Products, the country’s biggest biscuits maker, maker of Hide & Seek and Fab biscuits.

Executives said besides first-time online grocery shoppers, consumers from two and three-tier markets contributed to the strong acceleration in online sales. While the lockdown imposed across the country starting March 25 led to factory shutdowns, supply chain disruptions and labour shortage, online grocery retailers including Amazon, Flipkart, Grofers and Bigbasket reported unprecedented surge in demand with new customer acquisitions and higher average order values.

“Growth of e-commerce in the grocery segment is irreversible,” said HUL chairman Sanjiv Mehta late last week at Massmerize 2020, an event hosted by industry body FICCI.

Online sales now average 2-8% for almost all FMCG companies even as they continue to rely on millions of traditional kirana stores to sell the bulk of their products. However, conversion to the online business is forecasted to accelerate very rapidly. RedSeer and BigBasket forecasted in a September report that the e-grocery market will grow to $18.2 billion by 2024 from about $3 billion this year, even though the online penetration of the grocery market is currently only at 0.5%.

Diary giant Amul managing director RS Sodhi too said its online retail sales have more than doubled from 3% to 7-8% within six months.

Company executives said they expect the online surge to continue, but that kirana stores and modern trade channels would also remain relevant. “Our view on channel growth is long term. With the present penetration of organised channels still low, we believe that both e-commerce as well as modern trade will continue to grow in the medium and long term,” said Sanjay Mishra, Marico chief operating officer, India sales. The maker of Parachute hair oil and Saffola oats reported 39% growth from e-commerce in the September quarter, contributing 8% to the company’s overall turnover.

ITC, maker of Sunfeast biscuits and Aashirwaad atta, had said in September that the online business contribution for its FMCG portfolio has grown rapidly over the past 12 months to 4.2% of overall sales now from 2.3%. For Dabur, another homegrown company, e-commerce business is now 6% to overall sales, up from 1.5% in the corresponding year-ago quarter.

The trend is also driving companies to push online-only brands.


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