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The Financial Express

Impacts of Covid-19 on FMCG industry

| Updated: July 02, 2020 12:59:25


Impacts of Covid-19 on FMCG industry

Worth $3.4 billion as of 2017, the fast moving consumer goods (FMCG) industry is one of the biggest industries of the country. Hence, it would be beneficial to find out what new trends are taking place in terms of day to day business practices in FMCG companies. In addition, how they are coping up with this new normal might be insightful for other industries as well. Young professionals from reputed corporations of the country have shared their perspectives on this from multiple angles.

Business performance

The demand for some products increased sharply while rest experienced substantial drop: "Ever since the pandemic started, consumers started panic buying certain categories of products such as hand washes, hand sanitizers, detergents; while they cut back their expenses on other products due to declining/no income"- Scionara Shehry, management trainee at Unilever Bangladesh Limited paints a clear picture.

MD Mazharul Islam, brand manager at Square Toiletries Limited, delivered a more specific view: "In the past two months, the demand for hand sanitizers has outgrown previous year's total demand by more than tenfold." In essence, for most companies with highly diverse portfolio, a few product categories experienced tremendous growth while most others took a plunge. However, the growth of those few brands were, in most cases, sufficient for balancing out the loss incurred from the rest. Also, the crisis paved the way for the cleansing products. So, businesses are using this opportunity to develop and leverage from more products like these, too. Consequently, as a whole, the companies are performing just as well as before, if not better.

Supply chain

Supply chain is the sector where these companies have the potential to be affected the most. The supply chains of FMCG companies are pretty vast and intricate. And this complicated structure is being affected due to increase of lead time, volatility of price, and inaccuracy of forecasts.

Due to the lockdown, some routes for shipment are at halt now. As a result, supplies are not being delivered in time. Consequently, this is causing ripple effect in every subsequent function of the supply chain. Ultimately, productivity is being lessened severely. In addition, some vendors are out of supply themselves. Now, the companies cannot sit idly due to that. Instead, they are looking for new vendors. And this is forcing them to build new relationships with those vendors which are making things slower. Also, they are not having as much leverage in terms of negotiating as they had before. As a result, expenses are increasing as well.

On top of that, supply for certain materials have become highly uncertain. As a consequence, prices have also been inconsistent. And this high volatility is making accurate forecasting a big challenge.

Now, to counter these problems, companies are trying to ensure as much preparation as possible for any uncertain event. Mazharul Islam explained, "We are being on the lookout for any source of high-demand materials. If it is cheap, we are acquiring it even if we may not need it immediately. This makes it possible to have material at hand at times of unpredicted supply shortage."

Finances

In terms of finances, major problems are taking place in two areas -- budget allocation and payment clearance.

The budget for every brand is typically fixed beforehand. But the budget made before this crisis has failed to predict the subsequent high uncertainty in demand. Consequently, the budget for the high-demand brands is insufficient while that for the low-demand ones is in surplus. As a result, this is hindering the over-performing brands to reach their potential.

The other change of practices came in the clearance of bills and documents. One brand manager at a top FMCG company of the country exclaimed, "Traditionally, the invoices had to be delivered via hard copy. However, that is not possible in the current situation. So, companies are now trying to establish online portals and to initiate the practice of receiving and processing scanned soft copy of bills and documents."

Marketing

Marketing expenses are being severely cut everywhere. Most marketing jobs are now being done from home. However, activation campaigns, production of films etc. have stopped completely. They have been replaced by extremely low budget films produced using the low-quality equipment of the artists themselves.

In addition, research works have shifted online, too. This has affected some companies badly-- specially the ones which typically require data from rural and less technologically literate regions. One brand manager at a top FMCG company of the country explained, "A big chunk of our most useful target market lives in the rural areas and they are by no means, technologically resourceful. As a result, we are not being able to gather customer insights as effectively as we used to before."

In person retail monitoring and regulation processes are facing inconveniences as well. These practices have been shifted online as well. However, the retail people are not that technologically knowledgeable. As a result, the monitoring process is not being as effective as it was before. Nevertheless, powerful data analytics is being implemented as substitute and it is a much more efficient and promising tool than the traditional process. In fact, Akib Uddin Khan, territory officer at British American Tobacco Bangladesh opined, "The increasing use of data to identify and solve problems looks very promising as it will gradually enable them to tackle much more complex issues in the future."In terms of solutions, at this point, there is no direct way out of it. However, businesses are trying to adapt to the new normal. Companies are building up the practice of doing research online, replacing outdoor production with animated films or other digital equivalents. In this crisis, there is no scope to get back to the traditional way of life, so adapting to it and evolving is what businesses are aiming for.

Covid-19 has altered the traditional business practices and customer demands. Getting used to this new normal is not easy, but the only way forward. Only then can the negative effects be overcome.

The writer is a third-year student of BBA programme at the Institute of Business Administration (IBA), University of Dhaka. He can be reached at
rashikriasat404@gmail.com

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