FMCG Sector in the Light of Union Budget 2021: What Your Business Agenda should Look Like?

The Union Budget tabled by the Hon’ble Finance Minister of India earned a lot of appreciation from the major sectors across the nation for its direct addressing of the crucial sectors, like infrastructure, agriculture, healthcare, education, start-ups and Public and Private Partnerships (PPP) etc. 

While the government has set a precedent in terms of tax relaxations, health initiatives and availability of digital and warehousing services for farmers, no direct benefit is announced for the FMCG and logistics sector. This comes as a surprise for the sector as it witnessed a growth of 4.2% in the last year despite manufacturing and distribution complications because of nation-wide lockdown!

So, how does the future of the FMCG sector in post-COVID India look like? Are there any promising days ahead, and is the sector going to benefit from the Union Budget, 2021 indirectly?

In the following post, we explore the answers to all these and many other questions and offer a glimpse of all the things that should be on your business agenda for 2021 as an FMCG brand. 

How can there be indirect gains from the Union Budget 2021?

No economic sector is a standalone entity, as it is affected by many other operational sectors contributing to a nation’s economy. Likewise, FMCG is a sector that is directly linked to agriculture, infrastructure, export and import, logistics, taxation, and many other major sectors of the Indian economy. 

Hence, the FMCG is bound to resonate with the vibrations in the other sectors. Find how Union Budget 2021 announcements can spur the FMCG sector.

1. Farmers and Agriculture Sector

While the government has offered no direct benefit to the FMCG sector, the announcements for the agriculture sector, PPP setups, start-ups and export are looking promising indeed. With a direct focus on the betterment of storage and warehousing facilities to farmers, the FMCG brands with perishable brand offerings can now get better raw materials. They can even get their raw materials directly from farmers as they have access to digitized buying and selling platforms.

2. Export of goods

Further, the budget stressed on increasing the export of agricultural products to encourage manufacturing in India and give a boost to the rural sector. This move is also aligned with the “Make in India” initiative and is going to have a positive impact on the FMCG goods’ consumption in the rural areas, as the Finance Minister has also proposed to increase the agricultural credit to INR 16.5 lakh crores. The FMCG brands that are working directly on the farm produce can certainly gain from these announcements.

3. Infrastructure and Job Creation

The Finance minister has also stressed on job creation and infrastructure development that is also expected to spur demand for daily consumables and household products and groceries. The government has increased spending on rural infrastructure development to a whopping INR 40,000 crore and allocated INR 10,000 crore to double the micro-irrigation corpus to help create jobs and improve farm incomes. 

The infrastructure and job creation is looking promising for the urban markets as well, which was under a severe impact of COVID-19 pandemic. However, the execution is of key importance as it is going to decide the overall pace of this development and will drive the results of these announcements. 

4. Start-ups and PPP setups

The recent initiative by the Indian government towards the PPP sector, the highly controversial farmers’ bill, has been receiving mixed opinions and is still going to take a lot of time to finally morph into something concrete. However, the government is not taking a hiatus with a direct focus on PPP setups and start-ups, where the tax-payment window has been extended for one more year. 

So, the start-ups and micro-business setups related to the FMCG sector are directly gaining from the current budget. We could see, there is a lot of untapped potential in this sector and an immense scope for the FMCG sector to draw gains and gain momentum for this financial year.

Now that we have explored the various ways the FMCG sector can gain from the other sectors, let us move on to the “HOW” part of the same.

What should be on your agenda as an FMCG brand for a profitable stint in 2021?

1. Technology and digital transformation

Your best bet is the technology and digital transformation that can directly offer you business intelligence in relation to the untapped rural markets, more active and more profitable urban markets, and advanced actionable analytics on how to loop-in the agriculture-related start-ups in your business model. With the help of latest technology and automation in the Agriculture and Manufacturing sector, we can have better distribution and supply chain of goods to rural as well as urban markets.

2. Cross-market research

For venturing into unexplored seas, you need to test the waters first! Doing an extensive study of rural consumption in the light of Union Budget 2021 can certainly allow you to create a more robust roadmap for your business expansion in rural areas and establish a distributor network that delivers to the local demands exceptionally well.

3. Investing in market-specific automation

Majority of FMCG brands have been using automation and digital tools to decipher the market and distributors in urban areas only. However, now, is the time to do the same for economically weaker and less-literate sections of the Indian economy, where demand and purchase decisions vary significantly. 

So, you have to employ regional agents, train them and then let them out on the field to grab, create, nurture and hone regional rural distributors in the way they want to. Sales automation platforms are going to be of extreme importance in this as they help your sales reps to have better reach in the market along with the smooth stock movement.

While it is easy to alliterate the directions for the business agenda of FMCG brands, doing it practically is still daunting and time-consuming. Brands should start acting now for effortless transition and emerging as a market-ready FMCG brand to tap the profits promised by the Union Budget 2021!