From instant noodles and potato chips to shaving creams and body lotions, packaged consumer goods have brought unprecedented convenience to our daily lives over the past few decades. While the variety and choice of new products on offer have increased manifold, for the average consumer hardly anything has changed in their favourite products. But if you look closely enough, even for the humble pack of wafers or body lotion, everything from how its raw material is procured to how it is produced, packaged and delivered has undergone a sea change.
The reason for that is the various digital-led processes that manufacturers are rapidly adopting across their myriad operations. While leading industry players have deployed resources for years to digitise their sales and distribution channels, this time around, the use of digital tools has encompassed all key elements of their business—from sourcing of raw materials to supply chain and inventory management to manufacturing lines, consumer insights and product development. The impact of this digital push—on the country’s Rs 10.4-lakh crore fast-moving consumer goods (FMCG) market—is prominently visible in the rapidly evolving ways in which FMCG players conduct critical tasks such as gauging a customer’s moods, researching a new product, improving supply chain efficiencies or delivering the products to your doorstep.
For instance, American food giant Kellogg’s local unit, which has been in India for nearly three decades, initiated a digital transformation programme some three years ago. According to Prashant Peres, MD for South Asia at Kellogg, in the first leg of its project, the company digitised its communication processes that helped it keep the business running during the first Covid-19 wave. Motivated by that, it has deployed the programme to transform its supply chain, product development and go-to-market strategy as well. “Based on the principle of ‘customised off-the-shelf’ strategy, we decided to customise our products based on specific consumer needs instead of trying to invent products on our own every time,” he says. Following this, they have also moved to digitise their distribution management system in partnership with Ivy Mobility, a consumer goods tech-solutions provider.
Peres says that the next phase came in descriptive analytics and creating a dashboard that helps them identify potential micro-markets through analysis of sales data. Additionally, it has adopted an app called “Parinam” for its frontline salespeople to accurately measure their sales performance. This has led to happier customers. Data analytics, coupled with an integrated business planning system, helps it forecast demand at the shopper level with 95 per cent accuracy. “Since we started, it has improved by three times,” he says.
Kellogg is not alone. At the country’s top FMCG firms—from Hindustan Unilever (HUL) and ITC to Nestlé India, Dabur and Marico—digital transformation has been at the core of their success in recent times. Sanjiv Mehta, CEO and MD of HUL, concurs, adding that earlier FMCG companies used to procure raw materials at scale to keep the costs down. “But now, we are... creating ecosystems involving consumers and operations, where data and tech are taking centre stage,” he says. According to Mehta, digital transformation will be a key factor in building the “HUL of tomorrow”.
To that end, HUL began with digitalising its go-to-market strategy by developing a mobile app called “Shikhar” for its retailers that had 100,000 kirana stores till early-2020 and currently has around 700,000 stores. So, even when salespeople do not visit the stores, retailers can place their orders via the app. HUL has also implemented high levels of automation at its fulfilment centres to cater to the retailers in real time. Further, it has tied up with State Bank of India to ensure that retailers get paperless credits through the app. Not only that, Mehta harks back to the time when most of the market research was done physically. And then, R&D teams would create prototypes, test them and conduct dry runs based on those insights. But now, all of that is done through simulations, Mehta says, adding: “The entire process of getting insights into the consumers’ mind—from their changing behaviour and emerging demands to placing the products on the shelf—is taken from our intelligent ecosystem. This also helps in our decision-making, be it our pricing strategy across SKUs (stock keeping units), whether to invest in distribution channels, or promotion and in which media.”
Salt-to-cigarettes major ITC, too, is banking on digital tools to stay ahead of the curve. According to Shuvadip Banerjee, Chief Digital Marketing Officer at ITC, the company is rapidly adopting digital processes with a specific focus on consumers, experience of its services, supply chain management and manufacturing. Under its ‘smart consumer’ initiative, it has taken a multi-pronged approach with tools like Sixth Sense that includes a customer data hub, moment marketing, ITC e-store and e-commerce. Through Sixth Sense, its teams track conversations on social media and trends on e-commerce platforms, and then analyse the data with artificial intelligence (AI) and natural language processing (NLP) prediction tools. According to Banerjee, this has improved the chances of success of every new launch and also helps in targeted promotions.
Banerjee explains that to improve consumer experience at its hotels, on its D2C platform and for its stationery business, ITC has launched three additional apps. First, the ITC Hotels App enables customers with easy access to room and F&B reservations, food delivery and loyalty benefits, among others. Second, its Unnati app for trade partners has already onboarded 300,000 outlets, while its virtual salesman app Viru enables contactless ordering by retailers and direct communication with trade partners, especially during the absence of a salesforce. The app also uses ML for hyper-personalisation of displayed products. Further, to improve sourcing, Banerjee says, the company’s Astra project allows for optimal buying, better price recovery and enhanced operational efficiency. “The AI-powered tech platform, ITCMAARS provides personalised, hyperlocal solutions for the farmers, while the physical layer enables last-mile delivery of products and services,” he adds.
At ITC’s AGM this year, Chairman and MD Sanjiv Puri had said that the company is investing in cutting-edge digital tech to shape a new paradigm of competitiveness, create innovative business models and tap new opportunities. According to him, ITC is exploring new frontiers across the entire value chain to add significant impetus to digital marketing, commerce, products and operations initiatives. Meanwhile, Banerjee claims that its digital drive has already borne fruit by improving productivity and optimising costs. For instance, he adds, various initiatives of digitalisation and implementation of Industry 4.0 tech has enabled ITC Paperboards and the specialty paper business to expand its margin by 230 basis points over the past two years.
If ITC is bullish about transforming itself through digital tech, executives at ayurveda major Dabur India are also not resting on their laurels. According to Mohit Malhotra, CEO of Dabur India, the Ghaziabad-based FMCG major has been infusing future-ready tech like AI/ML, robotics and automation to drive greater efficiency across the organisation. It has covered processes such as supply chain, manufacturing, and sales & marketing to reduce costs. In addition, tech is being used for maintenance scheduling, downtime analysis, and assets health management to ensure smooth functioning, while the company has already been using a digital procurement system for key raw materials, services and capital goods for nearly two decades now. “This not just saves valuable time and money, but also creates the potential for microanalysis of every step of the e-procurement journey. We also engage tech extensively in the area of traceability, besides tracking of shipping containers and transport vehicles,” says Malhotra. Further, last year it deployed a dynamic visualisation tool of its digital coverage and added new outlets with geo-tagging facilities to track and operate its field sales force with real-time actionable data.
“We have also partnered with Google to deploy its data-led marketing and programmatic capabilities to target dedicated audience cohorts on digital. We have reached audiences interested in our brand categories via high-reach platforms like YouTube, OTTs, gaming and news apps,” says Malhotra. Moreover, Dabur’s extensive collaboration with Amazon has led to sharp targeting of category shoppers via programmatic ads for its brands like Odonil and Dabur Chyawanprash. “We worked together with Lemma Technologies, which helped us run real-time contextual advertising campaigns for brands like Nasal Drops, Shwaasamrit and Broncorid across smart screens inside doctor clinics in Delhi-NCR,” he adds.
According to Vrijesh Nagathan, Chief Information & Digital Technology Officer of Marico Limited, the company has adopted a healthy mix of in-house and commercial off-the-shelf digital solutions depending on the tech’s maturity, time-to-market, customisation and cost-benefit analysis. It has also planned significant investments for the modernisation of its core tech stack and migration to the cloud. “Currently, we are driving a cloud-based data-lake migration along with planning for future data streams. This will provide a boost to the AI/ML initiatives that we are undertaking,” Nagathan says. Digitisation of its logistics processes and creating an end-to-end payments process has helped it reduce vendor payment cycle time by around 75 per cent. The company has also implemented geofencing of its facilities to enable auto-reporting of shipments through an integrated system of SIM-based tracking. “In FY22, we implemented a robotic automation-based order management platform that has reduced order processing to a fraction of a second, while simultaneously managing the complexity and variability in demand,” he says.
Nestlé India, the country’s largest packaged foods company, is utilising digital tech to achieve the goal of rapidly expanding its portfolio and rural footprint while keeping the costs of expansion in check. According to Chairman and MD Suresh Narayanan, the company’s drive to extend its presence—to some 200,000-odd villages, from 70,000 now with targeted product placements—is strongly backed by digital tools. It has also tied up with start-ups like ElasticRun, a rural B2B e-commerce platform, to help boost its expansion, along with utilising the wholesale route for quicker expansion.
To keep its new product developments targeted and cost prudent, Narayanan says, the company had tied up with digital analytics start-up Midas that now helps it assimilate and take decisions based on data collected from its retailers and consumers. Measures like these have helped it launch customised products for micro-markets while keeping costs in check.
The accelerated push for digitalisation among the country’s leading FMCG players is not without rationale. Data shows that since the pandemic, consumer behaviour has changed rapidly—leading to a steep rise in sales via online channels. From ITC to HUL and Nestlé to Marico, the share of online channels towards their total sales has surged by 200-300 points to 6-9 per cent. In comparison, the share of modern trade (in large-format departmental stores) remains at less than 6 per cent for the entire FMCG segment. According to experts, while modern trade continues to remain a growth prospect, its downside was exposed during the lockdowns. For instance, while at the end of 2019 the share of modern trade had surged to a record 10 per cent of the industry revenue, it plunged to zero during the lockdowns. E-commerce, meanwhile, enjoyed a dream run, while also offering convenience to consumers.
According to a report by analysts Abneesh Roy and Tushar Sundrani of Edelweiss Securities, FMCG companies are integrating their operations across suppliers, inventory management and distributor management. Earlier, they used to be separate, working in silos. “Quantifying the impact of all these initiatives and IT systems will be difficult for now. But what is certain is that it will help with a number of critical levers, right from order generation to order servicing to maintaining lower inventory, helping reduce write-offs and increase market returns,” they said. The digital push is here to stay for FMCG players.
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