Innovation is Key to drive growth in stagnant FMCG landscape.

Innovation is Key to drive growth in stagnant FMCG landscape.

Established FMCG companies in India are struggling for a double digit growth. Most of them are either in single digit or showing a negative trajectory. Old strategies no longer seem to be working and management is not showing confidence in launching NPDs or value creation through innovation. In this scenario, Brand managers need to go deeper to find out reasons for sluggish consumption.  What is it that compelling consumers to consume less or go for value degradation? Can it be attributed to a weaker/bleak economic outlook or a socio-cultural transition of Indian consumer? Or can we take a bold stance to say that FMCG brands becoming commodity and are no longer able to add value in consumer’s life?

Lack of clarity or reason codes lead to frequent changes in strategy and short term approach which often create more ambiguity in the system. Lower/Middle management starts hitting in dark, leading to frustration and chaos. In most common scenario, frontiers start executing things which comes from top management out of fear. This is the most dangerous situation to be into. Taking my learning’s from Jack Welch’s straight from the Gut, Top management needs to adopt firm & stable approach while dealing with issues. Getting into dialogues with middle/lower management often help in building confidence of frontiers to try new things.

Here I go with my attempt to decode the reason codes for current situation:

T o drive growth, either penetration or consumption needs to be intact. Unfortunately, both seem to have failed as demands are stagnant across SECs. Companies are trying to boost the demand by offering value thru consumer promotions/price offs. But again these are short term and your brand may fall in the price/value trap. Let us look around adjacent categories such as QSR/Fashion/Automobile/Smart Phones/Sports accessories etc. They are growing at a healthy double digit. Brands in this space are able to add value in consumer’s life and are helping them differentiate and make a statement.  While most of the brands in FMCG space are behaving like a commodity and no longer helping consumers to differentiate. You will no longer be able to extract more out of a consumer (Increase consumption) unless you are gratifying his evolved/new needs (Be it a functional or emotional).  Price off /consumer promotion might help you retain a consumer but remember this is not intrinsic to your brand. You are more vulnerable in this case; a new entrant may offer more and can take your consumer away.

The reason for brand switching is no longer the failure of a brand to perform but its inability to cater to the need in a different way. Analyst may say that this is not the right time to launch NPDs or create value through innovation in stagnant market. But, I have a different point of view. New product/innovation will bridge that gap of lack of differentiation and will give consumers enough reason to try/include your brand in his repertoire. The element of differentiation/innovation can be brought in various other ways:

1. It could be a more valid/interesting new RTB (reason to believe) Example: Lifebuoy; silver technology - Purana Gaya Naya Aaya https://www.youtube.com/watch?v=fcOzf2aKsGc 100% Germs free.
2. It could be through extending Brand proposition into a completely different category; example Dettol Surakha : Saaf dikhane wale Kitchen me bhi germs raha jaten hai https://www.youtube.com/watch?v=fDlDy_tKtvA
3.  It could be in the form making statement and having a point of view; Example Gillette’s  Shave India Movement : Stand up for a women https://www.youtube.com/watch?v=b4aiso6pvRE
4. Could be in form a gratifying a latent need (India uprising /a stream of nationalism) Example: Baba Ramdev’s Patanjali: Swadeshi/Instilling the whole lot of pride of being an Indian brand and bringing out heritage of Ayurveda in most palatable formats.

Marketing professionals tend get bored/fatigued in stagnancy and ambiguous situations.  HR buzz words; shelf esteemed, fighting attitude, capacity to think Bla Bla... look like more a Jargon/Gyan than anything else in real spirit.  Guiding teams to do new things/Innovation will help them be productive and get going in their learning curve.

Having said so, it is not easy to reinvent the brand proposition and come up with a winning/Innovative solution in crisis situation. It has to be built in to the organisational culture, a culture where people are not rewarded /reprimanded for success /failure but for their intent.

References:

Artiticles

1. http://www.exchange4media.com/digital/indian-qsr-market-likely-to-scale-$4.1-billion-by-2020_64570.html
2. http://economictimes.indiatimes.com/industry/services/hotels-/-restaurants/indias-qsr-market-to-touch-rs-25000-crore-by-2020-assocham/articleshow/49504930.cms
3. http://www.livemint.com/Companies/D6la6rk2jQ77EkOJwemgNO/FB-to-become-a-Rs-38-trillion-industry-by-201617-says-st.html
4. http://www.intelligencenode.com/knowledge/whitepapers/Indian-Fashion-Retail-Report-2016/ (Growth in Indian Fashion retail)
5. http://www.livemint.com/Industry/bulpIdEod7tk9HTftdo9bL/At-764-growth-India-fastest-growing-passenger-car-market.html (Highest growth in Passenger cars in the world)
6.  http://indiainbusiness.nic.in/newdesign/index.php?param=industryservices_landing/329/1 (Passenger Car Growth at 11.1% Year ending March 16)
7.  http://www.forbes.com/sites/kathleenkusek/2016/07/25/the-death-of-brand-loyalty-cultural-shifts-mean-its-gone-forever/#7e18f384e44d
8. https://hbr.org/2008/06/harvard-business-ideacast-100  : Innovation at P&G

Books:

1. Straight from the Gut :  Jack Welch
2. The Game Changer : AG Lafley & Ram Charan
3.  Our Iceberg is Melting: John Kotter