FMCG players reap in profits with D2C channel

By: |
August 01, 2021 10:03 AM

Traditional FMCG conglomerates like ITC, Marico and Tata Consumer Products have resorted to D2C to counter slow offline retail sales

During the pandemic, FMCG brands saw tremendous growth in volumes, as people were stockpiling.

Just like many other categories, fast-moving consumer goods (FMCG) majors too have decided to give the direct-to-consumer (D2C) selling channel a shot in the midst of the ongoing pandemic. As per data by Technopak, the D2C channel has grown around 20% in the past two years, led by the pandemic-infused demand, and it is expected to grow 15-20% in the next five years.

New-age personal and wellness brands like Mamaearth and Sugar Cosmetics have received high traction during the pandemic due to their digital-first approach, but now, even traditional FMCG conglomerates like ITC, Marico and Tata Consumer Products have resorted to D2C to counter slow offline retail sales. 

According to Sunil D’Souza, managing director and CEO, Tata Consumer Products Limited (TCPL), till March 2021, e-commerce sales of TCPL doubled to 5.2%, from 2.5% in March 2020. Last month, the company launched luxury tea range Tata Tea 1868, and Sonnets by Tata Coffee, a premium roast and ground coffee range under the premium beverages’ category, through the D2C channel. It is also expanding Tata Nutrikorner, a platform set up as a pilot in September 2019 for online shopping, to now cover the company’s entire gamut of products, starting with a pilot in Delhi and Mumbai. 

In April 2020, Marico launched Saffola Stores, an online D2C platform for consumers. Sanjay Mishra, COO India sales and CEO, new business, Marico, says, “We saw a sustained growth from our D2C channel during the lockdowns when other distribution channels faced logistical constraints.” In July 2021, Marico acquired a 60% stake in digital-first Just Herbs, shortly after its acquisition of Beardo, a grooming startup. In Q4 FY21, Marico’s e-commerce business grew 81% y-o-y, in comparison to Q4 FY20. The channel currently contributes 8% to the overall turnover of Marico’s business. 

Then there’s Gaia, a health and wellness brand, whose business has grown 80-90% from March 2020 till now, thanks to marketplaces, compared to March 2020. Gaia will be launching its D2C platform from August 1 this year. Dolly Kumar, founder and director, Gaia, Cosmic Nutracos, says, “Since the pandemic, we have been fulfilling an average of 600 orders per day from marketplaces.” The D2C platform of Gaia will comprise features like curated search, free subscription, no minimum order, live tracking and same-day delivery in the metro cities. Kumar expects Gaia’s D2C website to contribute 20-30% to the overall business in the first year.

D2C may “stay relevant even after things normalise”, according to Anand Ramanathan, partner, Deloitte India. In the past year, online channels have acquired new customers and D2C can help drive this growth, he adds. Further, D2C can also serve as an aid to brands to make data-oriented business decisions. 

During the pandemic, FMCG brands saw tremendous growth in volumes, as people were stockpiling. Therefore, D2C can help reduce overall cost of frequent deliveries. “The cost of fulfilment has decreased, helping brands to launch and deliver more products,” adds Ramanathan.
However, Ankur Bisen, senior vice-president, retail and consumer, Technopak, throws in a word of caution. “Over-reliance on D2C is a problem because traditional retail continues to dominate on the customer experience front,” he says. Omni-channel retail could be the best solution for FMCG, he notes.

Read Also: How mindful marketing is paving the way forward for brands

Follow us on Twitter, Instagram, LinkedIn, Facebook 

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

BrandWagon is now on Telegram. Click here to join our channel and stay updated with the latest brand news and updates.

Next Stories
1Adani Enterprises appoints Sanjay Pugalia as CEO and editor-in-chief
2How can SEO play an important role in helping small businesses flourish in the market
3Why brands are leaning towards meme marketing