Uncertainty driven by the COVID-19 pandemic has made consumers increase their savings, in turn leading to a big shift towards entry-level products and bigger packs that offer more value across categories, be it in fast-moving consumer goods or in consumer appliances.
The COVID-19 pandemic and the severe lockdown has had a huge impact on India’s economy. Many companies slashed salaries while millions also lost jobs. The impact of this has been hard on the huge middle-class population in India.
The middle class and lower class (C and D socio-economic classes) account for 58 per cent of the total number of households in India and their share in consumer spending is as high as 70 per cent.
Market research firm Euromonitor International estimates a 20 per cent decline in consumer spending in the households belonging to the C and D socio-economic classes. While over the last few years, there was a growing trend towards buying premium products across categories, that has appeared to reverse this year as mass-market products regain traction as people conserve cash.
“Given the large impact on consumers' income, premiumisation is definitely expected to slow down in 2020. Consumers are expected to be cautious when it comes to spending on discretionary or even on necessity categories,” says Vishnu Vardhan, a consultant at Euromonitor.
While spending on food and beverages as well as health goods and medical services is seen going up this year, compared with 2019, spending on transport, clothing and footwear and other miscellaneous goods and services is going to come down, as many people are working from home.
With fewer opportunities to step out, be it for work or family functions and parties this year, apparel sales are expected to decline around 25 per cent, while footwear sales are seen down nearly 30 per cent.
Reduced social occasions have also had a huge impact on premium beauty and personal care products, where sales are expected to degrow over 5 per cent in value terms, even as mass-market or value for money beauty and personal care products are seeing an uptick, albeit lower than last year. Euromonitor cites two reasons for this trend—premium products have limited distribution and consumers may also be downtrading to the mass segment.
“These are difficult times for consumers and therefore we have seen a lot of themes as part of value consciousness from the consumers. First being downtrading, where consumers are moving to products, which are priced lower; second is private labels, where we have seen a lot of companies have come out with their own private label products and these are priced lower than the established brands. Third is value packs, associated with the essential categories, where consumers are buying bigger pack sizes, which are cost-efficient. Finally, there is mindful consumption,” said Amulya Pandit, senior research analyst at Euromonitor.
This downtrading is also visible in other categories like detergents. So, sales of standard detergent powders and bars are seeing an uptick in sales, while sales growth in products like liquid detergents and stain removers has slowed.
As consumers focus more on saving money, demand for consumer appliances is likely to fall 21 per cent this year. However, as people are stuck at home amid the pandemic, outdoor activities like saloons and restaurants were restricted, certain categories are seeing strong growth this year.
Dishwashers, for instance, are expected to clock a volume growth of over 25 per cent in 2020, compared with less than 10 per cent growth in 2019. Similarly, hand-held vacuum cleaners and body shavers are also expected to see a 15 per cent plus volume growth in 2020. Microwaves, a segment that de-grew in 2019, are also seeing an uptick as more people are baking at home.
In categories like refrigerators and washing machines, many first time buyers are buying entry-level products. So, average spends on products like semi-automatic washing machines and entry-level refrigerators are seeing a slight uptick.
This trend of trying new dishes at home is also driving consumption in food product categories like sauces, salad dressings, herbs and spices, with sales growing upwards of 15 per cent; in certain categories like mayonnaise, sales are growing more than 30 per cent.
Meanwhile, the COVID-19 pandemic has opened up a huge demand in health and hygiene products with sales across categories like liquid soaps, dishwashing and home care disinfectants seen going up. COVID-19 has also opened up new avenues for growth with products like fabric sprays, fruits and vegetable wash and meat wash. Not surprisingly, companies like Godrej Consumer and ITC have either expanded their existing product range into categories like hand and surface sanitizers, other companies like Dabur launched a new range of sanitizers.
Companies have also fast-tracked product launches with traditional ingredients like turmeric and tulsi as more people are now buying health and wellness related products. According to the Euromonitor survey, more than 40 per cent of the consumers said this shift towards more health and wellness products would be a permanent change.
