Digital to influence $45 Bn (40%) of FMCG consumption by 2020- Google BCG Report

by Shrutee K/DNS

New Delhi, September 27, 2017: Capturing the growth of digital influence and key consumer insights that will drive the next phase of Fast Moving Consumer Goods (FMCG) segment in India, Google India and BCG today released a report, “Decoding Digital Impact: A $45B Opportunity in FMCG 2020”. The report projects that 40% of FMCG consumption in India will be driven digitally, translating to a value of $45 billion by 2020. The report finds that while time spent on digital is the same as TV in urban India, share of digital advertising spends by FMCG companies was only 10% in 2016. This is, however, expected to grow substantially to reach 25 -30% by 2020. 

The report highlights that there will be 650M 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 2X more on FMCG purchases than offline consumers. India’s 28 million affluent and elite households will contribute to ~40% of overall online FMCG consumption by 2020, of which 60-65% 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 2 and 3 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 digital 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 ~10% to 25-30% by 2020.

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 3x 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 10X growth in vernacular 'searches', over 2X growth in watch time of vernacular YouTube content and 5X 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.

Speaking about the challenges that marketers face today, 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 percent of spend will be influenced digitally by 2020 and this will be driven by the 3 V's - video, vernacular and views & opinions.”

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’s 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.”

Report Methodology:

These findings were based on research conducted by The Boston Consulting Group’s Center for Consumer Insight. The research covers 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, etc.

About Google India Private Limited:

Google India Private Limited (Google India) is a wholly owned subsidiary of Google Inc.  It is engaged in the business of marketing & selling advertisement space and rendering Information Technology (IT) and Information Technology Enabled Services (ITES).

 

About BCG:

The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 85 offices in 48 countries.