COVID-19: Way forward for FMCG sector in the Middle East

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As businesses are grappling with the negative impact of Covid-19 severely disrupting their sustenance, Krishan Kumar Chutani, CEO of Dabur International provides insights on current challenges in FMCG sector, impact on FMCG marketing mix and macro-economic impact caused by the Covid-19 pandemic.

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Krishan also shares his four key strategies businesses can adopt to avoid disruptions from such pandemic in the future.

As the COVID-19 numbers remain on an upward trajectory, uncertainties surround us both at professional and personal levels. Businesses are caught off guard with the new challenges to tackle with. The pandemic impact in the region is expected to remain at least for the next few quarters and leave an economic scar in the long term. Companies are adopting strategies to maneuver the new challenges, and these are being implemented at unprecedented speed and scale to emerge as winners from this crisis.

At the same time, we are seeing a collective solidarity from governments pouring billions of dollars to save industries and people affected by the pandemic.  A lot will change, and we are all trying to predict the new normal.

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Permanent Consumer Behavior Changes expected in FMCG Consumption 

Confined within our homes, paradigm shifts in consumer buying behavior are emerging. Shoppers in the Middle East didn’t take long to turn online for their needs. Reliable connectivity, a mature e-Commerce ecosystem with faster deliveries enabled the digitally savvy population to quickly shift to online for their shopping needs. Research reports point out that, carts are first filled with hygiene products, and then food essentials followed by personal care essentials such as Shampoo, Toothpaste, Hair Oils, Hammam zaith, Hair Creams and so on.

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If we take the McKinsey study from China as a learning for other economies, then it becomes apparent that consumers will shop online more for FMCG products even after the lockdown restrictions are lifted. Safe distancing protocols along with hygiene will become the new normal for all outdoor activities. This will eventually lead shoppers stick with the new habit of shopping online to a greater degree.

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Impact on FMCG Marketing Mix

  • With more consumers spending time online, marketing communications and consumer touch points are moving to the virtual space. The pandemic has made it hard to market aggressively without being accused of insensitivity. So, a softer tone with more relevant messaging must be developed. Brand building must replace the traditional ROI based approach while considering marketing budgets. Innovative and bold marketing campaigns emphasizing consumer wellbeing and highlighting the safety of customers, staff, and suppliers, and the quality of the product are the need of the hour for the FMCG sector.
  • In-store experience and behavior will change – social distancing will remain on everyone’s mind for a while and impact the footfall and actions of people when they do get into a shop. Bulk buying and stock-up approach may stay around in the long run, forcing retailers in the FMCG sector to rethink their supply chains and manufacturing schedules to always keep more inventory in stores and in warehouses.
  • Invest in technology-first eCommerce platforms – As consumers have shifted to online shopping, our investments in eCommerce platforms have increased to expand the footprint across MENA countries.  ECom platforms enable us to deliver personalized communication to improve consumer engagement and at the same time we are continuously learning online shopping behavior to fine tune our offers.   We have 200+ SKUs listed in amazon & We are also available in 10 other online retail platforms in UAE including direct retailer platforms such as Carrefour, Lulu etc.,
  • Last mile fulfillment critical for success – We realize that the best online campaign may not fetch desired results unless backed by robust fulfillment to the last mile. We are ensuring enough stocks are maintained and consumers’ needs are met on time.

Macro-economic impact of the pandemic on Middle East FMCG sector 

The Middle East has been relatively ahead of the curve when it comes to battling the pandemic. Governments have been proactive and have instituted widespread testing, nationwide disinfection campaigns and the government is investing heavily in helping people across all nationalities, protecting jobs, and driving liquidity into the economy.

The oil market despite its current slump is one of the few sectors that can count on a complete recovery when demand is back to normal, expecting the region to be one of the first to bounce back to business as usual.

Coronavirus impacted manufacturers and global supply chains.

What can we learn to insulate ourselves from similar disruptions in the future? We adopted a four-pronged strategy to counter the impact of COVID-19:

  • Predictive instead of a reactive approach: While most supply chains are always reactive to sudden spikes or lows in the continuous mapping of supply-demand complexities, at Dabur, we based our decisions on predictive modelling that can adapt to changing scenarios. This made it easier for us to increase production and supply of essential personal hygiene products. We prioritized our manufacturing lines for Dermoviva Sanitizers, Dermoviva Sanitizing Body Wash, and renewed focus on immunity building Dabur Chyawanprash supplement.
  • Glocalisation of supply chains: Developing a supply chain that is a mix of globally reputed vendors with local development and production centers enabled us to tide over the crisis with local supplies.
  • Digitization: We have amplified our supply chain digitization efforts allowing us to leverage data to shorten the reaction times of vendors. This has resulted in cost and time efficiencies while dealing with vendors across multiple geographies in real-time.
  • Think outside the box: Our biggest strength was our ability to challenge the tried and tested procedures and innovate on our feet. We implemented creative approaches across verticals, from sourcing to manufacturing to logistics, to find solutions in real-time and solved what seemed like insurmountable challenges.

Key takeaways for the regional FMCG sector

It has been a year of uncertainty so far and if predictions by global economic experts are anything to go by, then 2020 will remain in flux till at least Q4. With no clear future to bank on and keeping in mind the ever-changing nature of the COVID-19 crisis, executives will face tough choices.  Businesses must be careful yet boldagile yet cautious, and combine data with creativity to drive decisions. Only a corporate vision that combines and leverages all these qualities will be able to successfully steer its business through the upcoming challenges.

FMCG Businesses who have already been investing in Industry 4.0 technologies, are better prepared in scenarios like these. Digital Automation across manufacturing, planning, supply chain & marketing has been helping us to adapt and respond to overcome the challenges. Everything that we do has a “Consumer First” approach and this shall be the hallmark of future success.

(Written by Krishan Kumar Chutani, CEO, Dabur International)

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