FMCG cos brace for uncertain times, bet on premium craving

Income growth, better infra and digital adoption pushed the size of rural households' FMCG basket by 60% in two years

- Suneera Tandon

After a year of fluctuating demand, particularly in urban markets, packaged consumer goods companies are cautious about business in the upcoming fiscal year. Although companies see demand rebounding only from the first half of fiscal 2025-26, they have their hopes pinned on a growing consumer craving for premium products.

"In terms of three or four megatrends that we are seeing—premiumization is something that every company is driving, while also focusing on the core," said Rajneet Singh Kohli, chief executive officer and executive director at Britannia Industries Ltd, adding that changing consumer preferences will drive packaged food companies to continue investing in innovation.

Companies are also adapting to changing channel dynamics, especially as competition in quick commerce intensifies.

"There is a channel shift that we are seeing," Kohli said.

"As a company, we are ensuring we reach out to consumers where they are. Our big distribution muscle is the kirana (neighborhood) shops, which is 7 million outlets that we reach out to. We are also doing a lot of work on the rural expansion side," he added. "We are also doubling down on our e-commerce and quick commerce capabilities. Going forward, we would see channel-specific launches."

India's fast-moving consumer goods (FMCG) industry experienced a 5.7% growth in value with a 4.1% jump in volumes during the July-September quarter, reported NielsenIQ (NIQ), a consumer intelligence company. The industry had grown at a faster pace in the year-ago September quarter—9% in terms of value and 8.6% in volumes.

Companies blame the slowing pace this year on flagging urban demand caused by high inflation and increased competition. Rural demand, however, made up for this, with a normal monsoon boosting incomes. Indian households have been squeezed by rising retail prices, especially of food items.