CPG India Report: Categories Defy Expectations in Road to Recovery

Q3 2020 has brought more relief for brands and retailers, as per the latest COVID-19 Impact report developed by Bizom, a leading retail intelligence platform. The report analyses data from approximately 30% of the retail universe across 400 districts or 2000 towns and cities of India.

According to the report, after almost 10 months of disruptions caused by the Coronavirus, India's CPG market is almost back to normal with the recovery of demand well underway. However, on digging deeper, it found variances in performance across categories and regions.

The variance is most evident in the number of transacting retail outlets in different regions of the country. Analysis of secondary sales data shows that the number of weekly transacting outlets has increased by 13% - primarily in the Eastern and Northern regions of the country.

The increase in demand can also be seen in the replenishment cycles of retailers. It has changed from fortnightly or monthly cycles to weekly cycles. It is driven by the availability of products and credit in the market. Another replenishment trend observed is the higher frequency ordering with smaller volumes after mid-July.

Demand across categories has begun to stabilise. Beverages continue to be a consumer favourite while Personal Care sees the highest growth in the Q3.

Q2 2020 saw a major downward trend in demand across all categories except in commodities. The exception was Home Care which showed a V-shaped recovery.

In Q3 2020, demand is stabilising and getting back to normal. The exceptions are the categories of Packaged Food and Personal Care. Demand for the former dropped by 15% in September driven by a drop in consumption in the Northern and Eastern regions. The latter showed the biggest improvement in Q3.

The highlight of Q3 2020 was the performance of the Beverages category. It continues to show modest growth even beyond its peak season in summer and around the IPL games.

Demand across regions is back to Q1 levels except in South. In Q2 2020, the Western regions showed the slowest recovery with demand down by approximately 50% on average in comparison to Q1 2020. The Southern regions recovered the most due to their capacity to contain the Coronavirus. A similar trend can be observed in rural India where demand outpaced urban areas by 40%.

In Q3 2020, the Western regions recorded the highest increase in demand while rural India continues to perform better than urban areas.

Among our key observations, was the drastic drop in demand in South India after mid-June but it has remained relatively stable at 75% in comparison to Jan 2020. Our analysis is that the salaried class from IT hubs returned to their native lands after June when the lockdowns were lifted.

Retailer baskets are back to Q1 levels and spending on non-essential items is on the rise. In Q2 2020, the lockdown impact could be observed. Retailer spend on commodities increased by 34% in April and May while Beverages category lost the most in shelf space and consequently in sales and availability.

In September 2020, most of the categories are back to pre-lockdown levels in terms of retailer spend. Only Packaged Food and Commodities saw a dip in demand from the retailers. Home Care, Beverages and Personal Care saw the highest increase in basket share while spending on non-essential items is on the rise.

Lalit Bhise, CEO of Bizom said, "The COVID-19 Impact India report was originally conceptualised to help our customers to gain deeper insights into how their products are performing across categories and regions. However, our work with over 500 brands in India and across other emerging markets, gives us a ring side view to the performance of entire CPG ecosystem. The report analyses the recovery of demand in the number of transacting outlets, in the performance of various categories and in the rise in consumption of rural India. It is chockful of business intelligence to every stakeholder in India's retail universe."