Demand for FMCG products clearly is now returning to pre-Covid levels. How sustainable do you think this kind of growth is? Or is it more a pent-up demand which is at play?
There is a little bit of pent-up demand. In fact, some of our consumer trends are showing that as well and I will come to that, but whether we expect this to go down in a significant way in the coming months, I do not think so. People were in a bit of a kind of confide mode and there was a “break free” that was needed and some of the consumer trends are clearly showing that break free tendency. So an upsurge in June is coming from that. It is largely sustainable and is almost coming up to the pre-Covid levels that is as it was in December, January and February. Most of this will sustain.

Definition of necessity has changed thanks to Covid-19. What are the consumer spending trends that you are picking up and monitoring? Is there a stark change and a material difference in how consumers are spending and the behavioural patterns since April?
Till May, we were seeing a very big difference with the discretionary items staying really low and a lot of de-growth while the essentials were still doing well. In June, we find there has been an overall increase. For example, beauty care demand has gone up though it is still below the pre-Covid levels. Daily necessity items like toothpaste, shampoos, hair oils, washing powders have gone up and they are starting to rail slightly above the pre-Covid levels. That is where the combination of pent-up demand and real sustainable demand comes in.

Anything to do with hygiene, has really been going up. So the very heightened hygiene situation is there and those are trailing anywhere in the range of 10% to 20% over the pre-Covid levels. Anything to do with hygiene categories like liquid toilet soaps, floor cleaners also. Even the discretionary categories are starting to get some spending.

How is this crisis different from the previous economic slowdowns? The nature of consumption this time is different. Sitting at home we are consuming more, shopping less. The total wallet share of Indians will change dramatically because we are travelling less, eating out less, not going to movies, not celebrating basic festivals. There are fewer marriages. Do you think we may actually see a very different kind of cycle in staples and consumer discretionaries?
Let us look at the basic consumer drivers. Where are the consumers spending most of their money? They are saying the top one is healthy food and just note the points. So healthy food is the first one, personal and home hygiene is the second one, medical expenses is the third one, fitness is the fourth one and then there is education and then entertainment and investment.

If you look at it, there are three buckets – one is anything to do with health, healthy food, hygiene, medical and fitness, then it is education. There is obviously entertainment and there is investment. That is where they want to spend more money. They are really building the blocks for their future sustenance. They are building a strong armour from a long-term standpoint and what they are going to go down on. The big ones that consumers will go down on are dining out, travel, luxury brand spends, new cars, new bikes, tobacco and apparel.

So, one can see really that entertainment areas are going to dramatically come down and that is where the balancing of the budget and wallet will happen and big times spend on health, education to some extent and then investment will be done to secure the future.

The other big trend that is happening which is very important is that people are starting to break free. So when you look at questions like will you cover your mask when you go outside, will you stay away from public gatherings etc — some of those numbers are very high, but they are dropping. People are getting really restless and want to come out of the house. People are restless about keeping masks on. So while those are very high numbers, they have dropped by 10-15%. So, something that was 90%, has dropped to 85%, something was 85% has dropped to 70%. What has gone up in the same situation is home remedies to boost immunity.

Long-term, people are still saying that they will use masks, follow social distancing six months down the line. So, half of the society is still going to follow these norms but the other half is starting to break free and they are saying let me do something long term. As a result, you will find big category shifts happening over time.

Categories which cater to these fundamental trends of health hygiene, fitness, exercises, etc, will do well and communicate on those lines and launch products on those lines could do well, something to do with education will do well but all of these other entertainment options that we are talking about they are going to dramatically going down. There will be a very big rebalance of categories in my mind even within FMCG and outside of FMCG a lot more.

With rural India seeing a faster recovery, what are some of the trends there? Which are the areas that are seeing better demand when it comes to the rural market?
Rural market is picking up a lot, very good questions. We were forecasting that rural will go up in the coming months and we have forecast growth in the second half of the year, but it is really heartening to see that rural has gone up already to around 8% to 9% more than pre-Covid levels. That is a very promising trend and that is coming out of good monsoons which are already happening.

The rabi crop has been very good and with a reverse migration, rural heavy parts of the country are actually getting a boost of 1% to 2%. So everything put together. rural is up 8-9% over the pre-Covid period and I definitely feel rural demand will sustain. The next six to nine months will be the time for rural India. We have tried to do some forecasting here. We have said that in the next nine months — between July and March next year — we are going to possibly see 4-5% overall FMCG growth but the rural growth will be almost double of the urban growth. If urban grows in the 2% to 3% range, rural will grow maybe in the range of 6% or so. That is the kind of rural growth that we are expecting to see,

As long as Covid stays contained, I expect those forecasts to come through. It is showing around 8% growth in June versus pre-Covid times.

On the other hand, e-commerce has really picked up when it comes to the urban markets and also in tier II markets, along with the major metros. Do you see the importance of department stores, kiranas shrinking with the e-comm boom that we are seeing?
Let me give you some very interesting stats on both traditional trade and e-commerce. It is true that the bigger theme here is digitalisation and e-commerce is obviously digital but traditional trade is also very fast becoming digital. Today around 10% plus have digitised in spite of the huge store base that we have.

Interestingly, the June data shows that traditional trade has bounced back by 27 points and traditional trade sales are almost back to the pre-Covid level. Stores were closed for 12 days in April, from around 10-11 days in March. There were only 3-4 days of stores closures in June. So traditional trade stores are now mostly open. Digitisation is happening and it has bounced back by 27 points all the way to pre-Covidlevels.

On the other hand, e-commerce is still the most preferred contactless method of getting stuff. When you ask people about their preferred mode of delivery, e-commerce is at the top at 40%, home delivery from neighbourhood shops comes next at 34% and all other home delivery of aggregators, etc, comes to another 30%. Both these have gone up by 9% over a couple of months. So there’s a 9% increase in both home delivery from neighbour stores as well as food aggregators. On the other hand, visiting stores to the point that Milind said they are down in the range of 10% to 25%. The number of neighbourhood stores are down by around 10% whereas department stores and, modern trade are down almost by half.

You will find this rebalance where we will have to reach the staff to the consumer doorsteps, to the consumers home and as long as we reach it, both hyper local and e-commerce will do well. We are finding in the data that traditional trade is doing very well and e-commerce is doing well and all these delivery modes are doing well. There are different avenues and channels upto the doorstep of the consumer and so contactless is going to be the word for the future.