Opportunities often arise from crises. The adage irrefutably holds true for certain niches of fast-moving consumer goods. While the world grappled with a pandemic, the tailwinds of COVID-19 brought a structural change in FMCG.
It nudged consumers towards health, hygiene, and convenience-based products. It is these three pillars that will drive 2022 trends in the fourth-largest sector in India.
Healthier Food Products Will Rule
In 2021, consumption rose, with food and beverages accounting for 30 percent of total household spending in the country. The desire and demand for healthy food was the most noticeable trend and one that is expected to continue climbing.
Consumer behavior and eating habits have drastically changed post-Covid. People became more aware of the need to eat better, spurring a surge in expenditure on wholesome alternatives. They demanded nutritious options, and in the upcoming year, this demand for healthy products will only heighten.
The quest for products that build immunity has also shown a resurgence of interest in traditional foods. Unpolished pulses, for example, packaged in raw form with nutrition, aroma, and flavor intact, are favored over imported bland dals.
Boost in Branded, Hygiene-Focused Packaged Food
As people's lifestyles shifted toward wellness, so did the packaged food sector. Consumers are willing to spend more on food that is safer and more hygienically packed rather than being price-sensitive. The proof is in the numbers. Packaged consumer products gained 12.6 percent year on year in the third quarter of 2021.
Besides valuing hygiene, there is a clear inclination towards branded packaged products because it empowers consumers to evaluate food on criteria like health quotient, quality parameters, packaging practices, and others. The conversion of unbranded to branded staples has grown 3x in the past year, and the industry should anticipate the trend to emerge further. So much so that in the next decade, the branded packaged food industry will be twice the current size.
Convenience Continues Climbing
A shift in the market that will show no signs of abating in 2022 is convenience. With dual-income households on the rise and more people working from home, DIY and convenience will play a crucial role in the sector. Consumers will seek quicker options like ready-to-cook meals that allow them to spend less time in the kitchen.
Further, accelerating pre-packaged food will be the second dimension of convenience: variety. The average person doesn’t want to cook the same meals repeatedly, and they also wish to offset out-of-home eating with indulgent food. As a result, retailers will embrace a range of ready-to-cook meals with an emphasis on nutrition in the next year.
Rural and Semi-Urban Segments Emerge
Of the two demographics in FMCG, urban and rural, the former has always led the growth until recently. Per-capita food consumption has been on the rise in the rural segment. Moving forward to 2022, rural and semi-urban areas will be the higher revenue generators, primarily due to the evolution of lifestyle and higher aspiration levels in the segments.
Bringing Order to an Unorganized Niche
Healthy food, safer food, and more convenient food are ongoing trends that will carry momentum into the New Year. However, a significant change that will likely remain in the periphery is bringing order to the unorganized sector. Its market share is already falling, with the shift from unbranded to branded, more awareness among consumers, and deeper penetration.
If the FSSAI act is executed, the trend will go into high gear, bringing a long-due development in the industry. Once the FMCG sector is largely organized, the quality of products will leapfrog. Given that today’s consumer doesn’t just demand but expects quality, the shift may occur sooner than predicted. More benefits for the sector will follow, such as robust traceability processes and streamlined supply.
The prolonged pandemic is and will continue to mold the trends in FMCG. A few pillars, like health and hygiene, are predictably visible. However, other drivers of the market will shape how brands strategize and execute. In both cases, retailers need to know what’s coming next year, so they can see around the corner and future-proof their business.