FMCG industry to accelerate with collaborations & digital media

The competition in the fast-moving consumer goods (FMCG) increases with the entry of unconventional rivals, both offline and online. Hindustan Unilever (HUL) is one of the giants which announced the launch of a liquid detergent to compete against the retailer Future Group. Moreover, the FMCG firms including ITC, Dabur, Marico, and others have been launching digital brands for categories such as male grooming, personal care, and hair nourishment as startups and e-retailers enter the market with big ambitions. Companies including Wipro Consumer, Marico have invested in online firms such as Beardo, Ustraa, and The Man Company to unlock the untapped potential. Many companies such as Proctor and Gamble have invested in startups to collaborate and gain more market share.

Sanjiv Mehta, the Chairman and Managing Director of HUL, outlined that the firm would take necessary steps to be ready to face the future as the digital platforms are becoming a central platform for consumers. Over the next decade, there will be ‘Generation-Z’ consumers who would be utilizing smartphones, digital media, and internet. The technological advancements would impact the consumer behavior.

Commenting upon the shift of consumers and collaboration with companies, Sumit Malhotra, the Managing Director at Bajaj Consumer, said that consumer engagement across digital platforms is growing, enforcing companies to restructure the strategies. Bajaj Consumer collaborated with Reliance Retail for targeting consumers of ayurvedic hair oils that buy from their stores. The industry for FMCG is growing with tremendous speed with an improved influence of digital platforms. According to the research firm Allied Market Research, the FMCG market is expected to reach $15.36 trillion by 2025. The players have been seeking different ways to boost their sales.

The FMCG sector in India filed a petition to the government for removing the goods & services tax (GST) on the retailers’ and dealer’s amount. This, in turn, would offer reimbursement against discounts for promotional activities. According to the policy of government, GST will be applied to amount given by supplier to dealer for selling a product at reduced price. FMCG market players offer discounts on printed price to grow sales numbers.

MS Mani, a partner at Deloitte India, stated that discounts are provided at various stages of the value chain and the GST treatment should be reconsidered. If certain discounts are not offered, then businesses may be at the disadvantage. The government has come up with two circulars on the issue, however, the issue regarding elimination of GST on reimbursement for subsidy offered by dealers and promotion by dealers has not been discussed. Tax experts opined that the government needs to re-examine the taxes if it intends to levy GST on this amount. Pratik Jain, the national head for indirect taxes at PwC, outlined that necessary changes should be done if the discounts are kept outside the GST purview. Considering the wide scenario, the government should work in collaboration with industry leaders and develop a revised and thorough plan on various aspects of application of GST on discounts.  

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