With the economy in the grip of a slowdown, consumers have begun downtrading to counter the rising prices of fast moving consumer goods (FMCG). Even as the jury is out on whether downtrading is gaining momentum in the Rs 1,85,000-crore Indian FMCG industry and would accelerate in the next few months, others are debating over the prevalence of this trend altogether.
While some FMCG companies are witnessing strong signs of downtrading, there are others who are not apprehensive about consumers opting for cheaper variants this financial year. “I am seeing signs of downtrading in the discretionary part of the FMCG industry, which is visible more in urban markets as compared to rural India. To some extent, we are seeing lower growth in higher-priced brands while lower-priced brands are posting higher growth by 20%, ” said Dabur India managing director Sunil Duggal.
According to Duggal, Dabur's economy toothpaste brand Babool has registered a higher growth rate of 20% in the last few months. “We are looking at expanding the production of brands that are in demand now. If there's more demand for low-priced brands, we will increase our production capacity for these brands,” he added.
As rural demand is still strong for mass market products, Dabur is planning to expand its rural distribution network in the next few months. According to retailers in north Mumbai, the signs of downtrading is very strong in key categories such as toothpastes, toilet soaps, branded tea and personal care products. “Consumers are now asking for Babool or Vicco Vajradanti pastes as they are economically priced. Consumers are now choosing Girnar Tea or Wagh Bakri Tea to save money,” said a retailer in Mumbai.
Like Duggal, Tata Global Beverages (TGBL) managing director Harish Bhat is also seeing signs of downtrading in the domestic market. “But we have a well-balanced portfolio at different price points from Tata Tea Prmium to Agni to meet the changing needs of consumers. With investments behind all our brands, we will retain loyal consumers this year,” he said.
According to Bhat, beverage majors are facing two major challenges which