The fast-moving consumer goods (FMCG) market in India is expected to recover completely by the April-June quarter of next year, according to industry experts. After facing challenges due to the pandemic and other factors, consumer goods companies are now anticipating a gradual revival in demand.
Consumer goods companies had earlier estimated a steady demand situation by the second half of the current fiscal year. However, they have now revised their estimates and expect demand to recover only in the first quarter of FY25. The large organised players in the FMCG sector have faced competition from regional and unbranded players in rural areas, as well as from new age players at the premium end. Despite these challenges, the market is expected to show good volume growth in the next two quarters, driven by rural recovery and pricing actions taken by the large players.
Saugata Gupta, Marico’s managing director, highlighted the competitive pressure faced by major players in the market. They’ve experienced challenges from both regional and unbranded competitors in rural and direct-to-consumer segments, as well as from emerging premium brands. Gupta expressed optimism about the market’s potential for significant volume growth within the next two quarters. This growth is expected to stem from rural economic recovery and pricing adjustments made by larger market players. Additionally, Gupta noted the stable economy and improving inflationary conditions as contributing factors to this positive outlook.
The cost inflation faced by consumer goods companies began with the pandemic and was further exacerbated by Russia’s invasion of Ukraine. As a result, prices of household care products, food, and beverages have more than doubled in the past ten years. Additionally, there has been a noticeable drop in rural volume due to inflation and erratic monsoons. While urban demand has been leading the overall growth, companies expect rural volume to recover with the help of a decent monsoon, which typically translates into higher sales after a quarter lag.
Signs of Improvement
Although rural demand is still trailing urban markets, there are green shoots of recovery visible in the FMCG sector. Rural FMCG sales expansion was about 6% in the June-September 2023 quarter, while urban sales volume grew by 8%. This indicates that the overall market, including smaller, local, and unbranded players, is experiencing growth. FMCG volume growth for the September quarter was 7.2%, with certain categories showing demand stress while others continue to grow.
RTM Watch’s Take
The FMCG market in India is on the path to recovery, with signs of improvement in both rural and urban areas. While challenges such as inflation and competition from regional players persist, the market is expected to show steady growth in the coming quarters. The recovery timeline has been revised, and industry experts now anticipate a complete recovery by the April-June quarter of next year. This recovery will be driven by factors such as rural revival, pricing actions by large players, and a decent monsoon. Consumer goods companies need to focus on supply-side actions and regain consumer share of wallet to capitalise on the growing demand. Overall, the FMCG market is expected to regain its momentum and contribute to the economic recovery of the country.
