– By Ritesh Arora
The Indian Fast Moving Consumer Goods (FMCG) industry has undergone a metamorphosis over the last decade and a half, transcending conventional boundaries and setting new benchmarks for global impact. A retrospective data comparison over the past 10-15 years reveals a resilient sector that has consistently adapted to changing consumer behaviours, economic fluctuations and technological advancements.
From the advent of e-commerce platforms to the rise of digital marketing, the industry has seamlessly integrated innovation into its fabric. As per NielsenIQ, the positive momentum of the FMCG industry reached newer heights, with volume growth surging to an impressive 8.6% at an All-India level in the third quarter of 2023. This upward trajectory was further complemented by a substantial +9% value growth, driven by the sustained impetus in volume. During the same time, the food sector exhibited remarkable growth, recording a +8.7% increase compared to the same period in 2022. These statistics highlight the industry’s resilience and its ability to navigate challenges, affirming its position as a cornerstone of India’s economic prowess.
As we delve into the exploration of India’s FMCG sector, let us have a look at some of the factors that have fuelled its growth and its evolving landscape.
Evolving Consumer Preferences
The Indian consumer landscape has undergone a significant transformation, fuelled by relentless consumer-centric innovations. This transformation is one of the main factors of India’s phenomenal growth in the FMCG industry. Factors such as escalating disposable income, urbanisation, focus on convenience and a burgeoning commitment to healthy living have triggered an upsurge in demand for a diverse array of FMCG products, with a pronounced inclination towards organic alternatives. Today, FMCG companies are continuously reinventing themselves in response to this seismic shift in consumer behaviour. Their focus has shifted towards gaining a profound understanding of consumer preferences, needs and lifestyles. This nuanced understanding not only aligns with global trends but also strikes a resonant chord with consumers who increasingly prioritise responsible choices in the products they choose to bring into their lives.
Product Innovation
The escalating emphasis on convenience and consumer health has ignited a surge of innovation within the FMCG industry, specifically in the consumer food sector. The FMCG companies have remained finely attuned to changing preferences and have rolled out a diverse array of innovative products. As consumer demands continue to evolve, the industry is undergoing significant transformations, encompassing the rising popularity of organic and natural alternatives and the introduction of convenient options like Ready-to-Cook meal options. These innovations not only broaden the range of products offered but also enable FMCG companies to reach a more diversified customer base. According to a report by Technavio, a global market research firm, the ready-to-cook market in India is estimated to grow at a CAGR of 7.12% between 2022 and 2027. The growth of the market depends on several factors, including a growing preference for convenience food products in the working population, new product launches and an evolving retail landscape.
The E-Commerce and Quick-Commerce Revolution
The strengthening of e-commerce and the significant rise of Quick-Commerce in India has propelled the FMCG industry to new heights. Both platforms have become essential components of the FMCG ecosystem. Marketing strategies increasingly include quick-commerce and e-commerce-specific approaches such as product listing optimisation and digital advertising that target online customers. E-commerce platforms’ seamless ease and vast product offers have been a big driver of FMCG growth. According to the IBEF, the ease of internet buying, along with appealing discounts and incentives, has aided the FMCG industry’s expansion.
Notably, e-commerce now accounts for 17% of the total FMCG consumption among evolved consumers who are affluent and make an average spending of about Rs. 5,620 (U.S.$ 68). The market has grown exponentially over the past five years due to the surge in internet and smartphone users and an increase in disposable income.
On the other hand, the Quick Commerce sector in India is anticipated to yield a revenue of US$3,349.00 million in the year 2024. Projections indicate that the market is poised to display a CAGR of 27.42% for the period 2024-2028, ultimately resulting in an estimated market volume of U.S. $ 8,828.00 million by 2028. By 2028, it is anticipated that the number of users in the Quick Commerce market in India will reach 56.4 million users.
This represents a huge opportunity for the FMCG companies in India. They will definitely look to capitalise on their bouquet of online offerings by increasing coverage for delivery, offering more convenient and quick delivery options, and providing items or products that are difficult to find offline.
Rural Penetration and Market Reach
The FMCG sector has made significant progress in rural India, employing innovative marketing and distribution strategies to expand its reach. Rising rural incomes and heightened aspirations have boosted consumption, driving demand for branded FMCG products. According to a NielsenIQ report, the packaged consumer goods industry in India saw a 9% increase in value and an 8.6% rise in volume during the September 2023 quarter compared to 2022.
Given that rural markets account for more than a third of FMCG sales, the growth in these areas is crucial for the sector. Rural markets showed a sequential volume growth of 6.4%, up from 4% in the preceding June 2023 quarter. Both packaged foods and non-foods experienced a year-on-year growth of 8.7%.
Global Expansion
The Indian FMCG market is not only thriving domestically but has also witnessed a significant influx of international players. The competitive landscape has evolved beyond local boundaries, with renowned global brands actively entering this space. This surge in international involvement not only augments revenue streams but also serves as a testament to the quality and competitiveness of Indian FMCG products on a global scale.
With consumer preferences continuing to evolve, technological advancements reshaping the industry, and the ease of doing business prevailing, the future holds even greater promise for the FMCG sector in India.
Conclusion
As India continues to grow as a major global economic player, the FMCG industry will remain at the forefront, serving as a barometer of the nation’s consumer sentiment and economic health. However, it remains imperative for companies to be agile and responsive to evolving market dynamics to make the most of this opportunity. The journey so far has been impressive, but the best could be yet to come for the Indian FMCG industry.
(Ritesh Arora is the CEO – India Business & Far East at LT Foods Ltd.)
(Disclaimer: Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.)