E-commerce critical for FMCG growth, study highlights

A NielsenIQ study highlights e-commerce as the top sales channel for 60% of FMCG companies, with emerging manufacturers achieving 1.5x category growth online. Convenience stores dominate medium and large businesses, while ready-to-eat products lead growth in 2024.

A NielsenIQ study reveals that 60% of FMCG companies consider e-commerce their most critical sales platform, with nearly three-fourths of mid-sized businesses identifying it as their top channel. Emerging manufacturers are outperforming category averages in e-commerce, achieving 1.5 times higher growth in products like noodles, refined oil, biscuits, coffee, and packaged atta.

“Indian businesses are recognizing the growing importance of digital as a significant operational channel and are now crafting targeted strategies to win in this space. Consumers are embracing the unique benefits of e-commerce, driving increased traction for brands from emerging manufacturers across key FMCG categories,” said Pallavi Suresh, executive director – emerging brands at NIQ India. She highlighted that varying channel preferences among businesses of different sizes reflect a retail shift in India, emphasizing the importance of omnichannel strategies.

The report notes that convenience stores have achieved a 48% penetration in India, significantly above the global average of 18%. Large companies use this channel the most (58%), followed by medium-sized ones (54%). While traditional channels remain crucial for large enterprises, small and medium-sized businesses are increasingly leveraging online and convenience stores.

NIQ’s market measurement identified ready-to-eat products as the fastest-growing category in 2024, with a 52% increase through September. Other top-performing categories include salty snacks and refined edible oils (41% growth each), biscuits (40%), and packaged atta (39%).

Inflation impacts pricing strategies across the board, with 75% of large, 67% of medium-sized, and 66% of small businesses prioritizing pricing adjustments. Large companies diversify distribution channels, while smaller businesses focus on cost management. To address inflation, 50% of businesses use cost-effective material alternatives, 49% invest more in distribution, and 47% each streamline product lines and enhance marketing efforts.