The FMCG sector was already grappling with the economic slowdown when the pandemic struck. While its volume growth has dipped, the sector is less impacted than other beleaguered industries because of the inherent need for essential goods. In an interview with BusinessLine , Saugata Gupta, MD & CEO, Marico Ltd, spoke about how the company is faring amid the pandemic, its strategy, changing consumer habits and shopping behaviour. Excerpts:

What are the changes you are seeing due to the Covid-19 situation?

I think compared to other industries, our sector (FMCG) is significantly less impacted. There would be a squeeze in the disposable income at the bottom of the pyramid of the middle class. You also see a shift towards health and hygiene, immunity and well-being. As people are going out less, there would be a little less (focus on) grooming. The other would be the shopping behaviour — people are going to use more e-commerce, the neighbourhood kiranas and home delivery. So, the omnichannel will grow. There will be fewer footfalls in modern trade because of social distancing. Another reason is people are not going to travel long distances to shop. You have to adapt to those changes.

There will be a huge impact in the middle income and the bottom income groups. Whether the migration will get reversed, we don't know. The urban bottom of the pyramid will be far more impacted than rural, maybe. If the harvest is fine, I think the rural (demand) will be much more in control.

Marico has experimented with new forms of distribution and delivery. Do you think it’s a long-term thing, where you yourself connect to the consumer directly?

People with direct distribution or alternate channels of fulfilment are more likely to do well. People are looking at, first, availability, second, trusted brands. And third, as things normalise, people are going to look for value, because right now, they are doing pantry loading and buying large packs, but as it normalises, they are going to look for value. So, I would say that amongst all the experiments we are doing in distribution, some will obviously get scaled up and will become the new normal. We would like to continue with direct-to-consumer because that gives us direct contact and access to data, which is very good for consumer engagement.

We will look at multiple fulfilment, and I think the omnichannel is here to stay. A lot of transformation in what I would call the go-to market or the shift to e-commerce — what would have happened in two-three years — will now happen in six months.

Earlier, you would have seen a lot of promoters in a supermarket. They used to give samples and detail out products. Now, with social distancing, that will go out. For example, the entire way personal care or beauty is sold will change. In beauty outlets, there used to be these beauty advisors who would help you buy a product. All that will now go because of social distancing and will move to online maybe. I think, in shopping behaviour and distribution, things that would have taken three-four years to change, will happen in the next six months.

How are you operating your factories with all the restrictions in place?

We are hand-to-mouth and are operating with zero inventory of products. We are rejigging some of the supply and factory lines so that it can accommodate social distancing without a significant loss in productivity.

Are you looking at a rejig in the product portfolio?

Last year, we were focussing on male grooming, skincare and some of the premium part of our hair nourishment and skincare. Although, in the long term, we will stay invested (in these categories), we will lie low on it for the next 12 months . I believe discretionary purchases will get impacted and, therefore, we are diverting some of our spending towards health and hygiene and food.

How is Marico preparing for this change?

Fortunately for us, the e-commerce contribution is already 5 per cent. We were having a digital transformation journey in the organisation, with respect to consumer engagement, performance marketing and analytics. We are going to accelerate that entire area. Second thing is, we are re-imagining the entire go-to market in terms of agility, demand sensing and ensuring that the product is available to the consumer.

So, some of the experiments which we are doing will get scaled up...the entire automation, digital and new way of work will get scaled up...Then there is the return of the neighbourhood kirana. I think everybody was almost sounding the death knell for the kirana, saying modern trade will gobble it up. I think these small format, open format stores have made a great comeback during Covid-19 times. They have been able to really service the consumers. Therefore, I think that is one reverse change that is going to happen in the next one year.

There is a view that there is a lot of pent up demand and that we will have a V-shaped growth. Do you agree?

Basically, given India's per capita income and all, there could be a pent up demand at the top end, but I don't see there will be a pent up demand translating into a V-shaped recovery because people are far more careful in the middle class and in the bottom end . I don't see the kind of revenge buying that has happened in China happening here.

Do you think the measures announced by the government so far would be enough to trigger demand?

Some of the measures will give liquidity, but some of the measures will take medium-term to long-term to pan out. For example, the decision on MNREGA is going to give cash directly to consumers, which will improve liquidity. But will it improve sentiment for spending? I'm not sure. Whatever the government has done, they have tried to do their best based on the current situation. Maybe a little more to spur direct consumption would have helped.

Marico has been investing in start-ups lately. Will you be continuing with that?

We will continue, but maybe the portfolio could be different. Even if we do, we will look at categories which we believe are more tuned into the current situation.

Do you think the pandemic will come in the way of Marico’s target of becoming a ₹10,000-crore company by 2020-21?

Yes, obviously. It’s too early to talk about it, but this year, it will definitely take a toll on growth.

How are you looking at the branding and advertising aspect of the business?

There would be at least a 150 basis point reduction in advertising and promotional spends this year.

When do you see the demand coming back to the pre-Covid level?

It depends on the vaccine. Otherwise, this will be a new normal that we will have to live with. A lockdown is a much more easy decision, getting out of the lockdown is a lot more tougher.

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