Small consumer brands continue to grow faster than their larger peers in India’s fast-moving consumer goods (FMCG) market. Aided by strong rural demand and easing inflation, small FMCG companies, with an annual turnover of under Rs 100 crore, reported their highest value and volume growth for the July-September period at 20.4% and 12.5% each, according to NielsenIQ. That’s the best in five quarters.
Mid-sized FMCG players, with a turnover of between Rs 100-1,000 crore too have reported strong double-digit value growth for four straight quarters, with volume growth between 6.8% and 9.7% during the period. In contrast, FMCG leaders, defined as those with an annual topline exceeding Rs 5,000 crore, grew 8.8% and 6.2% in value and volume terms during the July-September period.
While September quarter volume growth for FMCG giants was the highest in five quarters as urban markets revived, value growth was lower than in the June quarter (10.1%) due to GST-led price cuts and transition issues. Even as FMCG giants look to a better second half of FY26, on improved demand conditions and a stronger economic outlook, NielsenIQ believes small brands may not give up their gains anytime soon. A key reason for this is not just the propensity of small players to undercut larger brands, but also their ability to address local needs, the research agency said.
This has ensured stickiness by consumers for small brands, even as FMCG giants concentrate on improving direct reach in both urban and rural areas, increase brand-building, promotions and push hard on innovation to excite consumers. The second half is likely to see these efforts gain momentum as large players plough back savings made on gross margins to fight competition, experts said.
Price and Agility Advantage
Mohit Malhotra, CEO, Dabur India, pointed out that in food and beverages, for instance, challenger brands are able to price their products below the generally accepted price points. “If it is Rs 20, small brands may price at Rs 10 or if it is Rs 10, they may price at Rs 5. “What helps them undercut is also their micro-focus. This micro-focus brings with it a deep understanding of the local consumer and trade,” Malhotra explained.
Tarun Arora, CEO and whole-time director, Zydus Wellness, said that the consumer today is also far more experimental than he or she was earlier, which has helped small brands and D2C brands proliferate. “Consumer loyalty today is shifting and small brands are capitalising on this trend. The agility they bring to the table because they operate within a smaller radius or target specific product segments works to their advantage,”Arora told FE.
GST tailwinds, Arora says, will benefit both small and large branded players, implying that large brands may need to look beyond price if they have to deal with competition from small brands.
Some of them are already thinking ahead.
How FMCG Giants are Fighting Back with Local Focus
Annapurna Swadisht, a Rs 408-crore food company which operates in eastern India with a portfolio including snacks, noodles, biscuits and fryums, says it has no plans to move out of its home turf of West Bengal, Assam, Bihar and Jharkhand. “These are the markets we understand well. We have a personal touch with trade partners here. We are able to quickly rollout products and understand the pulse of the consumer,” Shreeram Bagla, MD, Annapurna Swadisht, said.
In biscuits, for instance, a brand called Jaya Biscuits, popular in the east has been giving large players such as Britannia, a tough fight, according to trade sources. The company has introduced local variations such as zeera rusk, 3-in-1 cracker biscuits and lemon puff biscuits to push sales. The company has an annual turnover in excess of Rs 200 crore.
Rungta Tea, which operates in states such as Uttar Pradesh, Rajasthan and Bihar, has set up tea parlours in select cities to increase brand connect and is also tapping online channels apart from pushing offline distribution to grow reach.