The new FMCG mantra: It’s not just about winning in many Indias, but winning across multiple cohorts

In her maiden earnings call last month, Priya Nair , MD and CEO, Hindustan Unilever (HUL), spoke about innovating and renovating HUL’s core brands. She also spoke about a strategy that would ‘continuously’ and ‘radically’ segment consumers. From targeting the highest spenders — Gen Zs—to building cohorts of consumers on the lookout for specialised skin or hair care, Nair hinted at micro-segmentation. While her mentor, Sanjiv Mehta, had talked about winning in many Indias by developing a region-specific product portfolio, Nair’s focus is clearly on building multiple consumer cohorts.

“If you look at India, it is emerging with clear consumer cohorts. At the top end of the pyramid are power spenders, the 80 million Indians, who are spending a lot of money and their average per capita income is going up. The democratisers are the bottom of the pyramid. HUL has an incredible portfolio that spans across price pyramids and there are opportunities to create strategies to segment brands, channels and cover each of these consumer cohorts and serve each of these consumer cohorts,” Nair had said.

A similar conversation comes to the surface at the Virginia House in Kolkata, the ITC headquarters, where MD and chairman, Sanjiv Puri, is also talking about micro-segmentation and ‘mass-personalisation’. His favourite example is Right Shit, a brand that targets the 45-plus consumer cohort with products such as jaggery cookies made with wheat flour, millet mixtures, and so on. He also talks about Mother Sparsh, which offers specialised baby care products beyond the usual baby lotion and soap. Puri expects specialised baby care to be a ₹10 crore cohort by 2030, which he says is sizeable.

Isn’t a ₹10 crore cohort extremely niche, especially for a giant like ITC? But the game today is all about building multiple ₹10 crore cohorts. Puri believes that the Indian consumer needs are becoming extremely specialised, and to stay on top of the game, even large FMCG companies need to adapt. One of ITC’s newest launches, Sunfeast Baked Creations, is a range of premium short-shelf-life cookies targeted at the upmarket Indian consumer looking for fresh food options. Staying ahead of the curve, being agile and being adaptive is the need of the hour, he says, which would also require reimagining business models. A short shelf-life product like Baked Creations, for instance, needs to be manufactured closer to the consumer and would therefore require a completely different supply chain mechanism. It would also need a differentiated digital marketing strategy, as conventional TV ads won't work for such niches.

HUL’s Nair is also talking about an overhaul of its frontline marketing and sales machine, to make it future-fit. “We will invest in marketing which is social first so that our brands are discovered online and we will invest our resources in future fit channels including quick commerce which is fast emerging in India. We will ensure all our high-growth spaces of scale are investing disproportionately. We are the original market makers of consumer products in India and we will ensure that as consumers become more affluent, we scale these markets into segments,” she said.

Why are the FMCG biggies feeling the need to change? “While keeping the portfolio future-ready has always been a necessity, what has changed is the speed of change. The dimensions of speed and agility are changing,” explains Puri.

“With technology, information access is becoming easier, so the consumer is changing. She is becoming aspirational, wants something healthy and also wants it to taste good. The aspiration is to have the best but she is still value conscious. Different niches and cohorts are emerging and with the rise of quick commerce and ecommerce, the go-to-market dynamics has also changed,” he further adds.

Intense Competition

None of the FMCG CEOs will admit to losing market share. Market research data from Nielsen and others don’t show the biggies losing market share either. But most market research companies don’t track the new-age, direct-to-consumer brands, nor do they cover the multitude of regional brands that are eating into the market share of the national stalwarts. The national brands are rapidly losing market share.

A Jaipur-headquartered distributor reveals how HUL’s shampoo brands have been rapidly losing share to D2C brands such as Nat Habit or Renee Cosmetics, disrupting the hair-colour market with innovations such as hair root touch-up powder, which offers a quick fix to cover greys, especially if one is in a hurry and doesn’t have time to do a conventional hair colour regime.

Similarly, regional brands are no longer fly-by-night operators. They are here to stay. With a better understanding of their local consumers, they are innovating in line with their target audiences’ tastes. Britannia MD, Varun Berry, takes pride in making biscuits a profitable category. However, it has also led to a flurry of activities among regional brands. “Indian entrepreneurs are smart and they could smell profits. They saw the category is becoming profitable and they started to mushroom. The regional brands have gained, but a lot of them go out of business in a period of time but some of them have sustained,” he says.

Berry talks about trying to operate in many Indias rather than one country. He talks about how the company has re-examined the formulation of its most popular brand, Britannia Marie, in the East. “The local players have a fluffier product. We have launched Doodh Marie, which is a fluffy product and it’s going to counter local players in those markets (West Bengal, Odisha and Bihar).” Similarly, in the North, in Punjab, the company has launched a sweeter variant of Nutri Choice Digestive without increasing the sugar content.

“In the North, people want a sweeter product. The Iocal company has made it sweeter and consumers are loving it. Without increasing sugar, how do we give that perceived sweetness to the consumer. You can do that without adding sugar as there are crystals which give you that feeling of sugar,” Berry further explains.

Piggybacking On Acquisitions

The FMCG biggies have realised that they aren’t really wired to think micro and have hence chosen to go the acquisition way. While HUL has acquired Minimalist, OZiva and Wellbeing Nutrition, ITC has acquired brands such as Baby Sparsh, Yoga Bar and 24 Mantra Organic. The challenge is to take these brands to the next level of growth and building cohorts; micro-segmenting consumers seems to be the right method of staying relevant.

ITC, for instance, has started using its in-house research and development expertise to widen the scope of these acquired brands. Yoga Bar, for instance, has diversified from just being an energy brand to a full-fledged protein platform that serves the protein needs of consumers.   

Former Nestle MD, Suresh Narayanan, says that cohort creation and micro-segmenting consumers is the need of the hour. “Companies have to manage innovation, manage technology, make choices on which segments to play in. They have to make both short-term and long-term investments in the right propositions. There may be a 50:50 chance of success, but they have to do it for survival.”

He says large companies will have to build 15-20 start-up futures within their organisation, giving them the freedom and resources to conceptualise, test and commercialise different propositions. “Companies are restructuring because traditional organisation models are becoming obsolete. The command-and-control model is passe. Smaller, more autonomous teams working together on specific platforms is going to become the order of the day. Larger players have to be nimble-footed,” adds Narayanan.

Building cohorts and micro-segmenting consumers would mean even more complex business models, but complexity is the name of the game today.