Did Pandemic Open Portals Of Success To FMCG Startups?

The lockdown has engendered a culture that has made people less wary of online shopping, quite to the point of near replacement of the brick-and-mortar purchase, which constituted the majority of the shopping by people in the happy pre-COVID times.

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The COVID-19 pandemic has proven to be a game-changer in the way business is done. The malicious virus attack, of a magnitude not seen in at least a century, forced many small businesses to down their shutters while making wholesome others to alter their approach and improvise on the spot.

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Needless to say, besides having luck on their side, businesses that relied essentially on minimal human interaction thrived despite the general slump in the market.

Impact Of Coronavirus

The rules of the game changed suddenly early in 2020 when the coronavirus sucked all the steam from an already flailing Indian economy. Businesses were caught unawares with not knowing where to look, as the government moved to suspend all travel, imposed the world-largest lockdown with the suddenness of a trapdoor shutting, and came with makeshift solutions to allay the gloom in the market, which more befuddled than enlightening the way ahead.

All the same, some businesses made amends in their approach equally on the spur-of-the-moment, and while many buckled under the pressure, these strode on smiling to a ringing cash register.

Confounded as all the others in the initial days of the pandemic, the start-ups, especially those in the fast-moving consumer goods (FMCG) sector, gradually came to find favour from people, helping them forge their way ahead, as many struggled and succumbed.

How The Game Changed

The change came in the way the general public took to order online for their necessities during the benighted months of the lockdown—a trend that has led to an altogether new ethos of shopping lifestyle.

The ready-to-eat venture ID Fresh clocked a 20% month-on-month increase in revenue in April, bucking the trend which saw a host of established firms struggle during the same period.

“In the first week of lockdown, we cut down production of some of the non-essential products such as iDVada (vada batter) even though they were profitable,” P.C. Musthafa, chief executive and co-founder of two-year-old ID Fresh said.

“Instead, we started expanding distributions in places that had minimal safety risks for employees. (Out of 12), we ramped up production of five essential products, including idli and dosa batter, and ready-to-make chapattis.”

Fueled by its success, the fresh food firm recently added the instant coffee powder to its repertoire to capture the increasing demand for the brew that coincided with the rise in work-from-home culture. 

Another major beneficiary of the same opportunities opened by the pandemic is Grofers. The e-commerce start-up firm has thrived neck-to-neck in the pandemic, even as it waged an intense battle for market capture against such giants as Amazon and JioMart, which are expanding in the same sector.

According to a media report in August, the e-retailer tied up with 600 local and regional brands to enable it to wage a discount war against the other e-retail giants.

Being an early entrant to the e-retail market has led Grofers to sustain the pandemic blow with relative ease. Till August, the firm was reported to have had a 40% addition in its membership since the lockdown.

And if market experts are to be believed, this trend is here to stay.

What Startup Bosses Are Saying

The lockdown has engendered a culture that has made people less wary of online shopping, quite to the point of near replacement of the brick-and-mortar purchase, which constituted the majority of the shopping by people in the happy pre-COVID times.

“We are witnessing a higher acceptance of home delivery, cashless transactions, and mobile payments, which bodes well for the industry. Recognising this trend, we launched the direct-to-consumer (D2C) portal, Saffola Stores, to make it easier for consumers to place orders directly, said Saugata Gupta, Marico’s managing director and CEO.

Gupta added that as social distancing norms continue, online purchases will take precedence and digital-only or digital-first portfolios will be of interest to consumers. We are betting big on the D2C model and digital brands to scale up our premium personal care and food business.

And the change is reverberated across the FMCG section, not limiting to edibles and other necessaries, but also making itself felt in the world of vanity as well.

At least as much is apparent from the success of Nykaa, a four-year-old start-up that sells beauty products.

According to the published reports, the firm is looking for a stock exchange listing by the end of the 2021 or early next year. The success of the firm, which is currently valued at $1.8 billion, was not only crippled by the pandemic but was rather catalyzed by it.

“Nykaa will most likely look at achieving overall profitability this year before going public. Considering the boost in business after the lockdown and consumer shift towards digital, the company might look at a listing of much more than $3 billion in valuation,” a source close to the development said.

Similarly unaffected has been the success of Beardo, a male-grooming start-up, which was wholly acquired by FMCG giant Marico, when it sweeped the remaining 55% equity stakes in the firm, having purchased the rest of it in 2017.

According to the report in Your Story, which wrote about the development, the firm has increased its revenue 40 times since 2016—the year of its founding—remaining overall impervious to the pandemic’s malignancy.

The start-up ecosystem in India, though precarious as ever, continues to rise despite the unprecedented obstacles.

Funding Scenario

According to reports, Indian start-ups received $11.5 billion funding in 2020, which was 10% lower than the previous year. But considering the anomalous factors which impeded the growth of the sphere, the performance cannot be called altogether bad for the nascent market.

Although the sector has been forecasted to have a downward trend for few more months to come, the situation has much improved since the early days of the pandemic, when it shrunk by 19% in the first quarter.

But the sector bounced back, in July-September when it rose by 1%, according to a Nielsen report, as the economy recovered.

Though the recovery remains slow and insufficient, a silverlining in the cloud remains in the view of a burgeoning e-commerce sector, which bodes well for the FMCG sector which covers only a 3.1% share of the total online market, allowing it a huge scope of revenue generation still.