Thursday, May 6, 2021

Opportunities and Trends in Cleaning, Kitchen & Home care

Covid-19 era or the lockdown period brought about many unimaginable changes in the way we do our businesses. Every sector was affected by the pandemic and so was cleaning, kitchen and the home care segment. Trying to find an alternative to the usual way of doing work, everything turned online from offline in the blink of an eye. From auditing to sampling to onboarding, everything was done digitally. While the lockdown posed as a huge challenge for almost every industry, the cleaning segment found opportunities in this difficult time as well.

In the fourth part of the six series webinar, we will see the challenges faced, the opportunities that came up and going digital for the cleaning segment.

Vicky Menezes, Founder, CMPL and Editor-in-Chief & Co-creator, WOOB was the moderator of this session. The panellists were Ashwin Suresh; Managing Director; Megamorph, Nonita Mittal; Category Head – Cleaning & Home Care (Own Brands); Star Bazaar, Prerna Singh; Category Manager – Own Brands (Cleaning, Kitchen & Home Care); Metro Cash & Carry, Sameer Shaikh; Regional Head – Buying & Merchandising; Big Basket and Saif Ahmad; Associate Director; Grofers.

Opportunities during Covid-19

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Cleaning, disinfectants, hygiene were a crucial category. Talking about his experience, Sameer said, “In the initial phase, whichever product had ‘clean’ word in it in the description was selling like crazy because people were so finicky about that, they wanted it all. The categories which saw huge growth in terms of sales were the cleaning category, disinfectants, dishwashing pastes & liquids and toilet cleaners. The categories that are still growing are the surface cleaners. A lot of brands have now in the last 2-3 months come up with surface disinfectants and floor cleaners and that will continue to grow. Usually we have one or two variants of these products, but now we have more than 3-4 variants in that category because there is a demand for it. These are the specific categories which are still growing and will continue to grow.”

Sharing her experience about last year, Nonita said that 2020 was a year where health and hygiene themes ran during the year. While cleaning has always been an indispensable part of every household, disinfectant is something that came into the light. We saw a lot of brands coming up with new products which were suddenly introduced by the end of quarter one in 2020. Consumers did react to that kind of demand, probably out of fear there was a lot of buying for those kinds of demands. But if I have to reflect back, I did see that by the end of quarter 3 or January 2021, the sales did slum. These sales had actually plateaued for those disinfectant products. In my opinion, the consumer is and will be comfortable spending more on home care hygiene. The products which will serve dual purpose of both disinfectant and cleaning should and will dominate 2021 such as multipurpose cleaners and kitchen cleaners. In fact, the constant king of home care category product, which is the detergent will also be reintroduced with a new version of claims such as ‘germ kill’ properties. The existing products and the new ones like the surface cleaners will dominate 2021.

Agreeing to Nonita, Saif too said that cleaners, surface cleaners, floor cleaners, is one category which skyrocketed last year, not only in penetration but also in the consumption pattern. The towns which are having population less than 5 lakhs is now consuming these kinds of products. The average consumption earlier was 752 ml per household and now it has gone to 890 ml per household. There is a long way to go for floor cleaners. Business in UP, central Bihar and West Bengal are the key drivers for this category. This change is irreversible. It has become a habit now. In every cart you will find floor cleaners as a part of monthly grocery. This category will evolve more in the coming years.

Attributes to look for in a manufacturer

Nonita shared the process Star Bazaar had developed over the three years which has helped them instil that feeling on to the vendor that while this is a brand that I am selling as a retailer, the manufacturer should equally feel proud and associate with the brand and that kind of maturity would ensure that the brand is a success on the shelf. It’s a 3-step process that we follow. Before onboarding, we have a very stringent audit process wherein there are various attributes that would ensure a standard quality supply from the vendor. Once the vendor is green rated, then only we discuss or initiate the commercial discussion of the sampling with the vendor. 

There are certain attributes that a retailer looks for in a manufacturer. Speaking about the same, Prerna said that availability of accuracy and content of a supplier is a necessity of any business. Improved insights into supplier’s capability is critical for any activity like sourcing, category management, contract, delivery, payments etc. In order to mitigate these, we need to take care of certain important factors. These are once we are onboarding a vendor we can emphasize more on checking on a category or a product line the vendor is involved in. Then, if we understand the financial position of the vendor that will help us to onboard the vendor fast. Apart from that there are certifications like environmental certifications. For example – these garbage bags issue, 6 months back, there was an issue with the garbage bags because plastics were banned. Similarly, there is an upcoming government regulation for mosquito repellent. Going forward, next year they will be sold with a code which again vendors have to implement along with the packaging. These kinds of issues if taken care of will help us to onboard the vendors quickly. 

The second part, Nonita explained is the fact that they have to take care of the vendor and to ensure that the brand is at stake does not only end at the onboarding stage, it is through the life-cycle or the business association that they have with the vendor and they continue to do so during the life-cycle of the product. “Every year we do this audit so that we make sure that the vendor is up-to-date with all kinds of audit requirements and all kinds of new regulations that are coming up in the market. We have developed a vendor scorecard, wherein we are putting a lot of emphasis on soft skills of the vendor’s availability like their ability to partner in R&D, problem-solving attitude and a timely analysis. In a product, there are bound to be issues, sometimes we experiment with some kind of packaging or formulation, but as far as the vendor is open to take those mistakes or learn them along with the retailer, the brand would be a success on the shelf.” 

Lastly, one of the things that we have just started is engaging our partners in the marketing activities that we are going to do with the brand. So, time-on-time we keep telling them the dishwasher that you are supplying to us, we are investing X marketing dollars, we are going to do an advertisement on social media, this is the offer we are running etc. 

Talking from a manufacturer’s point of view, Ashwin said that ultimately both are names on the label. It is a reputation that we build by giving good products to our partners and we have always seen that customers who treat us like partners rather than just like purchase order suppliers, their products do succeed. A partnership is where both of them are equally invested and success is almost guaranteed. 

Steps manufacturers take to smoothen the onboarding

The customer who comes to us would be interested in the quality, consistency and transparency, said Ashwin. These are three things that are crucial to getting a job as a contract manufacturer because most of the time people keep complaining with their current vendor on consistency that ‘iss baar ye colour aaya, dusri baar dusri colour aaya’. Some say packaging is not consistent, that is something we ensure to take care of. Batch one matches batch 10, 20, 30 and so on. Three years down the line, if you walk into our factory, you will see samples of everything we have made for you in the last 3 years. We have very good processes in place which ensure that none of our manufacturing is people dependent. Once the customer witnesses our processes, that gives them a lot of confidence to partner with us. I think that’s how we can get onboarded fast. Even during the lockdown, without meeting anybody personally or building a personal relationship, we have been able to build 3-4 new customers who have done virtual audits, video calls to look at our facilities and documentation and onboarded us very quickly.

There is a huge advantage in the current age where social media is gaining a lot of attraction, said Sameer. I remember during lockdown, Katrina Kaif’s video was all over the place where she was sweeping and then playing cricket with the broom once she was done with the sweeping of the floor and suddenly there was a rise in broom sales. So, a lot of such activities are happening on social media. Everybody is trying to catch up with the industry. If anything new is coming up, before us if the manufacturer also gets to know about it and approaches us saying these are the samples and let’s try and work on this, that also helps us a lot.

Product innovation is important, according to Saif. The product should be unique and have a strong solution providing ability for the consumers.

Digital onboarding

We onboarded 2 suppliers who were audited last year in the last quarter around the month of October, said Nonita. The virtual audit was the key point which was held without even meeting the vendor. There were video tours of the factory which were shared by the vendor, so there was an audit date which was fixed. But even prior to the audit date, because there was no such interaction, there were small snippets shared by our vendor to see how their factory is running, the raw material checking etc to give that confidence to the customer that they are capable and can do this without meeting in person.

The initial hiccup in this entire digital onboarding process was more from the supplier than from what we saw at Star Bazaar, informed Nonita. The internal team, quality team and R&D team were geared up, but the suppliers somehow were hesitant in sharing the documents, videos etc, so we had some trouble. There was some lead time spent in aligning those dates to get the video tour of the factory. Probably one of the reasons that we identified was because things were not stable and one of the things has majorly hit the cleaning industry or the procurement was the fluctuating raw material prices. They were wondering if this is the right time to invest their resources and energy in catering to a new business or just focus on the orders that they already have. There was that kind of gap in understanding. Then we had to build the belief and confidence in the supplier by saying that it is okay if the process is slower than regular, the lead times are longer than the regular, we would respect that, but let’s work towards it, otherwise we would lose a year and won’t be able to go as per our launch plans or not be able to give the consumers the changes they are looking for in the product. 

Another big thing that we did was sampling, said Nonita. During the onboarding process, we ran 2-3 processes parallely. The commercial team was discussing commercials, the quality team was doing the video audit of the factory and then the sampling team was already distributing samples with all the stakeholders because there was a lead time involved there. Patience and a constant follow-up did help us to get a successful onboarding.

With the onset of Covid-19, rules have completely changed, asserted Prerna. It was all about virtual meetings and aligning vendors virtually. It took quite a while for us and the suppliers to adapt that at first and get used to it. Another challenge was getting the sampling done. Since Metro was all closed down, there were samples which we received at our residence and then we again shipped it to team members to do the sampling and get the feedback on it. Other than that, it was the product benchmarking which was a challenge for us. To make the process a bit more streamlined, we should have a concrete vendor onboarding checklist.

Saif feels that the only thing which is added during the Covid-19 era is speed. Earlier we used to travel, now everything is done virtually.

We behaved a little different compared to others, said Sameer. Apart from the sanitizer, we did not onboard any new vendor mainly because it is a difficult and a long-term process. Onboarding from a tech point of view was easier at our end but short listing of products was consuming most of the time. We asked for samples and checked it and did all the audit tests, only after that we gave a go ahead for it. The brand name of both the manufacturer as well as the seller is at stake. That is the reason we did not take any chances. Even though we are not travelling, we ensure that we check the samples and release it. Though it delayed the entire process, at least there was assurance that the products we are shortlisting are not going to affect us in the near future.

Initiatives a manufacturer should take when a trend is emerging

The biggest opportunity I see coming up in India now is unique packaging, said Ashwin. We need to understand a lot about the customers and their mode of delivery, whether it is a wholesaler, retailer, online retailer, completely ecommerce-based business etc. Shipping of liquids is very critical. If there is leakage then it is going to damage everything around it. We have to be doubly sure that packaging is in place. 

In terms of trends, we try to analyse new players coming into the space for our existing customers, assured Ashwin. We send them portfolio shoots of their products next to the other products and see if we can improve our labelling and packaging to make our product more attractive on the shelf. When it comes to private labels, a very good development cycle is required and once we develop a certain product, it tends to get ignored and stays in the same label or same bottle for a long time. That drive comes from our end so that we nudge them and push them so that it looks more attractive, sells better which ultimately benefits both of us. With that interest we definitely put the research into play. 

Packaging is something we are focusing on, because that is what differentiates all the products from each other. If you are going to look at the surface cleaner category, you turn the bottle around and you read the ingredients, it is going to be the same across all the 28 surface cleaners that is available. It is the packaging where you can bring in a unique advantage.

Steps a retailer should follow when a trend is emerging

Being a retailer, we do have access to a lot of sales data and the brands that are coming in, emphasized Nonita. We also get our information prior to launches. If PNG is doing some kind of ‘germ kill’ new claim on the Ariel detergent, they will be sharing that information six months in advance regarding the new pack, the space that they want, this is the claim etc. So, being a retailer, it puts us on an advantage of being eyes and ears to all the brands and what is happening in the marketplace. 

Explaining the process at Star Bazaar, Nonita said that for launching any new product under our own label, the first step is to identify which segment you plan to launch a product in and for that we use a simple funnel approach to zero down on the category. For example – home care cleaning is the category we want to get into then followed by selecting the sub category which is utensil cleaning. Once that broad identification of the sector is done then we get into the research factor wherein we divide it into three parts. First would be commercial viability – the SKU mix which is selling in your store, the brands, the changes that the brands are getting, the inflation/ deflation in the MRP, current sales, regional sales etc.

Second aspect of the research is the market landscape, said Nonita. As a retailer, we have restrictions on our space. Everything we have in the world has been launched in Star Bazaar. We also look at how the market is behaving, the different private label brands available in the market and not just in our market, we also look at international markets.

Last part is the current and future trends, explained Nonita. There are a lot of news reports, newsletters that we at our company have read, we go through a lot of blog posts etc. A mix of all three sectors – commercial, market landscape and the trends are what helps us define the kind of products we want to launch or any upgradation that our current products need.

Sameer was of the opinion that being at the right position in terms of physical warehouse helps a lot in commercials. If you rightly look at it geographically, it helps you to crack it in a much faster and better way. For example – Big Basket’s large share comes from the southern part of India. So, if your factory is located in the southern part of the country, it is an advantage for 50-60% of the business. If you are pitching to a particular industry or a retailer, identify where most of the stores or warehouses are, where the sales share is and then accordingly, if you are rightly located geographically that gives you an advantage.

Change in procurement strategies since Covid-19

Covid-19 has surely brought a lot of changes in the procurement strategies since almost all the FMCG players have now entered into making vegetable cleaners, disinfectant, any variety of cleaners, said Prerna. The market has become more competitive. You need to identify or pick the right product, because all big FMCG brands have been getting into the cleaning category. These kinds of things will again require us to get into a deep market research and then decide on the products. So, for sure there are changes in the procurement strategy and there are challenges as well as opportunities. The opportunity is that we are able to negotiate on margins in a better way because there are again a lot of new entrants in the market and there is already an existing market leader.

There is more competition coming up with a lot of different products but product attributes have changed a lot, opines Saif. Choosing the correct product for the portfolio is more important now. We should come up with more consumer centric, solution provider, benefits-based products.

Nonita brought into notice that there has been a lot of unpredictable pricing of the raw materials last year. One thing that we made sure was that our suppliers were doing a proactive sourcing of raw materials and packing materials on the basis of the forecast that we were sharing with them. We told him if you are not going to buy this, the prices will increase, you have to hedge the price now as we are not going to increase the cost. We end up losing margins because they did not procure for 2-3 months. There was an increase in the price for almost everything. There was a lot of deflation in the pricing of the national brands. There was a price war in quarter 3. It started from Diwali and it ended in January. If your private label is there in your store on the shelf, you have to be cheaper than the national brands, hedging your prices and making sure your costs are intact.

As a manufacturer, procurement was a huge challenge for Ashwin as he would never want the shelves to go empty. We always have supplies and there have been times where the Indore factory was shut because of a lockdown there and we have to send stuff from Bangalore. Some other time the Bangalore factory was closed so we had to send things from Indore. We used to juggle around in all kinds of ways to ensure that the stock doesn’t go off the shelves.

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