How Sustainability is Transforming the FMCG Sector for Good

A revolution is brewing in the FMCG industry, fuelled by technological advancement, evolving consumer values, and innovative business models. With the rise of e-commerce and quick commerce, redefined shopping habits and innovative business models are disrupting traditional norms.?

To survive, I believe that organizations must stay attuned to the forces reshaping the industry, including emerging consumer segments, shifting usage patterns, and latent need gaps.?

As the sector navigates this generational change, stakeholders and decision makers must understand the implications and opportunities presented by these shifts to maintain sustained growth and competitiveness in the market.

In an article for the Economic Times, I detailed key emerging trends in the FMCG sector, and what it means for our ecosystem. Here’s a brief synopsis of the piece.?

Packaging for the Future

In my MBA class of '91, market segmentation likely focused on dividing consumers into broad groups based on factors like demographics, psychographics, geography, and behavior.?

Fast forward to today, advancements in technology, data analytics, and AI have transformed segmentation from broad strokes to highly personalized insights.

Emerging demographics, such as the elderly, single-person households, time-starved hustlers, conscious consumers, and tech-savvy individuals, are driving demand for tailored packaging.?

Key trends include easy-opening solutions for seniors, sachets (smaller portion sizes) and resealable packaging for singles, convenient and portable packaging for on-the-go consumption, and sustainable products with eco-friendly packaging.?

Consumers aren’t solely driven by price anymore. As per PWC, a large chunk of customers are willing to pay a 10% premium for sustainable options.?

Packaging, which is responsible for almost 40% of global plastic waste, is now carefully being accessed to accommodate its environmental impact.?

It’s not just sustainability that’s charting a new path for the packaging industry. In my view, the unboxing experience, packaging materials like corrugated boards, flexible plastics, and integration of technology such as QR codes enable informed consumer choices, authenticity verification, and virtual trials.?

With online shopping expected to cross 25% of all sales in 2025, I think that the demand for safe, convenient, and tech-enabled packaging solutions will increase. This will prompt a transformation in the packaging landscape that values experience, sustainability, and innovation over convenience.?

Technological Innovations Powered by AI

The global generative AI market in FMCG is projected to jump from $7.9 billion in 2023 to nearly $57.7 billion by 2033. AI is transforming business models, and reimagining customer experiences. Businesses are leveraging AI to replace manual, non-value-added tasks with automated processes in an effort to improve overall system efficiencies.?

AI's impact extends to targeted selling, enabling companies to tailor their offerings to specific customer segments. Moreover, AI in FMCG facilitates the development of differentiated, personalized packaging solutions in limited timeframes and quantities, catering to diverse consumer preferences.?

I’d argue that as AI continues to permeate the FMCG landscape, consumers can expect enhanced experiences, improved product offerings, and increased value.

Sustainability Principles

Changes in consumption patterns by consumers has led to substantial increase in the number of products and packs consumed by individual consumers. This has led to one of the greatest challenges that industry faces today, which is driving sustainability.?

Sustainability in packaging is no longer a buzzword; it is an urgent necessity.?

The impact of packaging waste on our ecosystems, public health, and economy cannot be overstated. The environmental degradation caused by non-recyclable materials is a crisis that demands immediate action.

Innovations in FMCG today must focus on driving sustainable solutions. Global food and consumer goods production accounts for 60% of greenhouse gas (GHG) emissions, 80% of water usage, and 66% of tropical forest loss. Sustainability will be an increasing concern with changing expectations of regulators, consumers and the employees.

The current trajectory of packaging waste generation is unsustainable. The packaging industry is at a crossroads, and the choices we make today will determine the future of both the industry and the environment.

The New Frontier for India's Consumer Goods Sector

As sustainability takes centre stage, I believe that India's consumer goods sector, pioneering companies are revolutionizing packaging solutions to minimize environmental impact. However, the country also faces challenges such as its vast population, diverse markets, and inadequate waste management infrastructure.?

At Marico, we are already making strides, with 95% of its portfolio being recyclable and significant reductions in plastic usage achieved through innovative packaging solutions.?

The key to success lies in embracing the principles of circular economy, zero emissions, and the tenets of Reduce, Replace, and Reuse.?

Another crucial aspect is embracing the mindset of frugality. Sustainability and frugality are inherently linked through the shared principles of resource efficiency, waste reduction, and environmental stewardship.?

Frugality encourages the mindful use of resources and the avoidance of excess, which directly supports sustainability goals. By minimizing waste, embracing the reuse of materials, and opting for products with a lower environmental impact, both approaches contribute to the reduction of ecological footprints.?

This includes transitioning to eco-friendly materials, reducing packaging material without compromising product integrity, and emphasizing reuse and recycling. By adopting sustainable packaging solutions, businesses can mitigate environmental damage while seizing opportunities for innovation and unlock India's potential for sustainable packaging excellence.

To summarize, innovation, frugality and collaboration is at the heart of sustainable growth for the FMCG industry. I remain impressed by the way Indian startups and companies are already pioneering new products and technologies that can redefine the future of the FMCG industry.

The packaging industry stands at a crossroads. Industry leaders, policymakers, and citizens must unite to establish a sustainable packaging ecosystem that balances profitability with planetary well-being.?

By investing in eco-friendly materials, fostering collaboration, and leveraging heritage practices, we can transform the industry into a force for good.?

The time for action is now – let us join forces to package a better world.

The original version of this article can be found on Economic Times. Read it here.?

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