FMCG companies: Be cautious, buyers are alert
FMCG businesses run the risk of losing customers due to quality problems and regulatory measures. Nestle India, Patnajali, the Bournvita scandal, and Hindustan Unilever rebrand in the face of omni-channel adoption and inflationary problems. An FMCG firm faces greater long-term risk of losing customers' confidence than short-term threats like stock market collapse and regulatory action.
The FMCG firms have an impending danger that they must manage as they manage the inflation problem, innovate to remain ahead of the competition, and embrace an omni-channel strategy to reach more customers. FMCG items are coming under more and more regulatory and customer scrutiny. Nestle India's stock recently fell as much as 5.4%, hitting a day's low of Rs 2,409.55 on the BSE. Following the disclosure that the international FMCG behemoth adds sugar to infant food items marketed in India—a practice not observed in Europe or the UK—there was a notable decline. This is the second time in the last nine years that Nestle India has been the subject of criticism for problems with quality. Its quick noodle brand Maggi came under investigation in 2015 after samples taken from Uttar Pradesh revealed high levels of lead and MSG.
An FMCG firm faces greater long-term risk of losing customers' confidence than short-term threats like stock market collapse and regulatory action. Subsequently, there have been other instances when people and governments have drawn attention to FMCG items.
What a string of occurrences reveal
FMCG goods bear the brunt of criticism on two fronts: the product's ingredients and the company's product promises. Patnajali recently made false statements, for which he had to issue a public apology. After the Indian Medical Association (IMA) pleaded for action against Patanjali Ayurveda for deceptive ads, the Supreme Court sent notice to the company's managing director. The business had, the court noted, first disregarded its prior injunction against deceptive advertising.
The government informed online retailers shortly after the Patanjali case that Bournvita and other drinks shouldn't be referred to as health drinks as the nation's food regulations don't define the term. Cadbury The most well-known malted beverage in the nation, Bournvita, was involved in a scandal last year when a social media influencer claimed that the beverage had a high sugar content. Forcing the influencer to remove the video, Bournvita's owner, Mondelez India, served him with a legal notice. However, the matter escalated into a contentious situation, and the National Commission for Protection of Child Rights (NCPCR) requested that the business remove all deceptive labeling, packaging, and advertising.
In reaction to recent regulatory changes in the health drink market, Hindustan Unilever (HUL) undertook a major rebranding initiative. The firm has withdrawn the Horlicks "health" label and rebranded its "health food drinks" division as "functional nutritional drinks" (FND).
The news that Nestle had added sugar to infant food items marketed in India surfaced a few days ago. This became apparent after samples of Nestle's infant food products sold in Asia, Africa, and Latin America were delivered to a Belgian laboratory for examination by "Public Eye," a Swiss investigative group, and IBFAN (International infant Food Action Network).
A recall of certain goods occurred at around the same time as Hong Kong and Singapore expressed concerns about the safety of popular Indian spice products. When the International Agency for Research on Cancer classified ethylene oxide—a pesticide that is considered unfit for human consumption—as a Group 1 carcinogen, the Centre for Food Safety (CFS) in Hong Kong, which conducts routine food surveillance, discovered that four products from well-known Indian brands, MDH and Everest, contained it. The US Food and Drug Administration is currently compiling data about the Everest and MDH products.
FMCG businesses due to danger
This recent string of events has highlighted the danger that the FMCG industry faces. According to Santosh Desai, managing director of brand consultancy company Futurebrands Consulting, the reclassification of health drinks might be a result of the Ramdev ruling, in which the court accused Patanjali for deceiving customers. He said that there may be an attempt to broaden the scope and try to take legal action against anything that the government deems to be deceptive. This suggests that as the public's awareness of the food industry grows, more situations like this one may occur in the future.
According to a Wazir Advisors analysis, there has been a noticeable change in the market towards natural, chemical-free food in the second part of the last ten years.
According to the survey, "consumers have gravitated towards functional foods to supplement their normal nutrition intake owing to their demanding lifestyles." It also said that by 2026, the packaged health and wellness food and beverage industry in India is anticipated to reach a valuation of Rs 2,50,000 crore. As to the survey, there is a predicted increase in demand for these items in tier II cities as well, notwithstanding their former concentration in metros and larger cities.
The general awareness grows along with the market. According to ET, the exposure that influencers generate might offset the value that businesses spend in their brands. Big FMCG firms often allocate between 10 and 12 percent of their earnings on marketing and advertising. They may have to pay more to make the product healthier or to offset the impact of the influencer's postings.
When it becomes out that the quality of their goods is questionable or that they are misrepresenting them, FMCG firms find themselves in a precarious position. In these situations, poor decisions may erode customer confidence and, as a result, the product that has required a significant investment of time and money. FMCG firms will need to invest more in product research and development in the future. They will also need to resist the temptation to enter new markets or get a larger market share by deceptive tactics such making false promises or descriptions.
