Digital to influence 40 per cent of FMCG consumption by 2020: Google-BCG Report

Forty per cent of Fast Moving Consumer Goods (FMCG) consumption in India will be driven digitally, translating to a value of $45 billion by 2020, says a report released by Google India and Boston Consulting Group (BCG).

Titled “Decoding Digital Impact: A $ 45 billion Opportunity in FMCG 2020”, the report captures the growth of digital influence and key consumer insights that will drive the next phase of the FMCG segment in India.

The report finds that while time spent on digital is the same as TV in urban India, the share of digital advertising spends by FMCG companies was only 10 per cent in 2016. This is, however, expected to grow substantially to reach 25 -30 per cent by 2020.

The report highlights that there will be 650 million internet users by 2020, driven by increasing mobile penetration, with the highest growth coming from non-metros, thereby reinforcing that digital in India is now a way to reach the masses, and not just a small, targeted opportunity. This mass reach makes it central for FMCG companies and will disproportionately influence categories such as baby care and beauty. From an audience perspective, the report estimates that online consumers spend twice more on FMCG purchases than offline consumers. India’s 28 million affluent and elite households will contribute close to 40 per cent of overall online FMCG consumption by 2020, of which 60-65 per cent will be digitally influenced.

On the back of assortment, convenience and availability along with discounting, the ecommerce segment within FMCG is expected to grow to become a $6 billion market in 2020. Sharing insights on customer preferences across metro and non-metro cities, the report predicts while availability of options is critical for users in large cities, consumers from tier II and III markets care more about factors such as express delivery and easy returns.

Even though the digital media has gained ground over the last two years, the spends on it are still not in-line with the time spent by consumers on digital. The lag in the spends can be allocated to multiple reasons such as lack of clarity on measuring the returns on digital, lack of expertise in the space or even inertia with traditional media. If these barriers are addressed, the share of digital in advertising in FMCG could potentially grow from nearly 10 per cent to 25-30 per cent by 2020.

Speaking about the challenges that marketers face, Abheek Singhi, Senior Partner and Asia Pacific Head of Consumer Practice, BCG, said, “Digital influence is no longer something in distant future – it is here and now. Like other markets, the urban India consumer already spends more time online than on print and TV. In FMCG, 40 per cent of spend will be influenced digitally by 2020 and this will be driven by the 3 Vs – video, vernacular and views & opinions.”

Outlining opportunities for brands to tap the online consumers, the report states that users are today seeking the 3Vs – video, vernacular content and views. In the last two years, the number of online video users has grown by thrice and digital video reach is already 2/3rd of TV reach in urban areas. Similarly, with the next wave of users coming in from non-metro cities, local language content is increasingly becoming important. There has been a 10-time growth in vernacular 'searches', over twice growth in watch time of vernacular YouTube content and five times faster growth of Hindi content consumption on websites versus English in the last one year. With digital platforms becoming a major source of information for the masses, views of advocates is also playing a big role in influencing the decision of the shoppers.

Advising marketers on their online digital advertising strategy for the FMCG space, Vikas Agnihotri, Industry Director, Google India, said, “FMCG was considered the last bastion for digital adoption but not anymore. It is growing rapidly and much faster than the industry imagined. Mass Brands need mass reach and online video today has the critical mass required for brands to drive business impact. Digital today is mainstream and we are seeing successful CPG companies investing behind not just media but insights and analytics to decode changing user journeys across categories.”

These findings were based on research conducted by The Boston Consulting Group’s Center for Consumer Insight. The research covers over 20,000 respondents, spread across Metro, T1-T3 towns and multiple FMCG categories – groceries and staples, packaged foods and beverages, household products (detergents, cleaning products), skin care, hair care, other personal care, baby care, among others.

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