Fast-moving consumer goods (FMCG) companies are gearing up for a transformative 2024, eyeing growth amidst a landscape marked by various challenges and promising opportunities. The preceding year, 2023, posed hurdles such as lower festive demand, rainfall shortfalls impacting rural growth, unseasonal showers affecting summer product sales, and inflationary pressures deterring rural customers.
Saugata Gupta, MD & CEO of Marico, expressed optimism, stating, “We expect the demand situation to improve by the next couple of quarters.” Major players are focusing on innovation and premiumization in urban areas, simultaneously expanding rural distribution. Pricing strategies have been employed to drive volume growth, setting the stage for a positive trajectory in the coming quarters.
According to market research agency NielsenIQ, the domestic FMCG market witnessed a commendable 9% year-on-year surge in sales and an 8.6% rise in volumes during the September 2023 quarter, predominantly driven by urban markets. However, rural markets, though displaying signs of progress, are on a path to full recovery.
The festive season in October-November experienced lackluster performance in kirana channel sales, constituting 80% of an FMCG company’s business in India. A shift in consumer spending patterns was observed, particularly in rural and semi-urban areas, impacting categories like beauty, cosmetics, and confectionery.
Acknowledging these shifts, companies are intensifying efforts to enhance direct retail reach, especially in rural areas. The focus includes revitalizing general trade through affordable packs, innovation at the bottom of the pyramid, and decluttering stores to reduce inventory pressure.
Mohit Malhotra, CEO of Dabur India, acknowledges the visible green shoots of recovery but notes that rural demand is still trailing behind urban markets. Liquidity pressures in rural areas during the festive season are indicative of challenges, but there is hope for a robust rural recovery in the coming quarters.
Prabha Narasimhan, MD & CEO of Colgate Palmolive India, emphasizes the need for companies to cater to both urban and rural consumers for sustained growth. She urges a diverse product range that addresses consumers across different economic segments.
Asif Malbari, CFO at Godrej Consumer Products, remains optimistic about growth in 2024, anticipating an improved economic environment and reduced commodity price volatility. The focus on market development aims to deliver market-beating volume growth.
K Ramakrishnan, MD, South Asia, Kantar WorldPanel, highlights that growing categories in FMCG exhibit a strong focus on both rural and urban markets, actively innovating to respond to macro occurrences. Categories like noodles, biscuits, and insecticides have seen substantial contributions to overall volume change, responding to shifts in consumer behavior post-Covid.
As FMCG companies navigate through these dynamics, 2024 holds the promise of innovation, resilience, and strategic adaptations to foster growth in both urban and rural landscapes.
