Deloitte, in partnership with FICCI, has unveiled the report titled ‘SPURring Growth in FMCG, Retail, and E-Commerce Sectors in India’ at the FICCI Massmerize event. The͏͏ report͏͏ highlights͏͏ the͏͏ crucial͏͏ role͏͏ of͏͏ India’s͏͏ consumer͏͏ industry͏͏ in͏͏ driving͏͏ the͏͏ overall͏͏ economy.
The͏͏ Indian͏͏ economy͏͏ demonstrated͏͏ remarkable͏͏ strength,͏͏ with͏͏ real͏͏ GDP͏͏ growth͏͏ reaching͏͏ 6.7%͏͏ in͏͏ Q1͏͏ FY25͏͏ despite͏͏ facing͏͏ global͏͏ economic͏͏ challenges.͏͏ The͏͏ IMF͏͏ has͏͏ raised͏͏ India’s͏͏ GDP͏͏ growth͏͏ forecast͏͏ for͏͏ FY25͏͏ to͏͏ 7%,͏͏ highlighting͏͏ the͏͏ positive͏͏ outlook͏͏ and͏͏ robust͏͏ domestic͏͏ demand͏͏ driving͏͏ the͏͏ economy͏͏ forward.
Key͏͏ Drivers͏͏ of͏͏ Growth:
This͏͏ growth͏͏ is͏͏ supported͏͏ by͏͏ strong͏͏ domestic͏͏ demand,͏͏ increasing͏͏ rural͏͏ consumption,͏͏ and͏͏ a͏͏ flourishing͏͏ services͏͏ sector.͏͏ Trends͏͏ like͏͏ premiumisation,͏͏ sustainability,͏͏ health͏͏ consciousness,͏͏ and͏͏ convenience,͏͏ fueled͏͏ by͏͏ digital͏͏ advancements,͏͏ have͏͏ led͏͏ to͏͏ disruptive͏͏ quick͏͏ commerce͏͏ models͏͏ in͏͏ the͏͏ retail,͏͏ FMCG,͏͏ and͏͏ e-commerce͏͏ sectors,͏͏ driving͏͏ significant͏͏ transformation.
Amid͏͏ rising͏͏ optimism,͏͏ the͏͏ report͏͏ emphasises͏͏ the͏͏ necessity͏͏ of͏͏ deciphering͏͏ a͏͏ new͏͏ retail͏͏ framework͏͏ centred͏͏ on͏͏ targeted͏͏ reforms͏͏ and͏͏ policy͏͏ changes͏͏ to͏͏ foster͏͏ innovation,͏͏ enhance͏͏ infrastructure,͏͏ update͏͏ laws,͏͏ and͏͏ ensure͏͏ balanced͏͏ development͏͏ across͏͏ urban͏͏ and͏͏ rural͏͏ areas.
Furthermore,͏͏ India’s͏͏ FMCG,͏͏ e-commerce,͏͏ and͏͏ retail͏͏ sectors͏͏ are͏͏ increasingly͏͏ leveraging͏͏ strategic͏͏ M&As͏͏ to͏͏ fuel͏͏ long-term͏͏ growth͏͏ and͏͏ competitiveness.͏͏ The͏͏ report͏͏ indicates͏͏ that͏͏ consumers͏͏ are͏͏ moving͏͏ towards͏͏ premium,͏͏ sustainable,͏͏ and͏͏ personalised͏͏ products,͏͏ leading͏͏ companies͏͏ to͏͏ innovate͏͏ and͏͏ enhance͏͏ their͏͏ portfolios͏͏ to͏͏ address͏͏ these͏͏ changing͏͏ preferences.
This͏͏ rise͏͏ in͏͏ consumer͏͏ demand,͏͏ coupled͏͏ with͏͏ a͏͏ heightened͏͏ emphasis͏͏ on͏͏ sustainability,͏͏ health,͏͏ and͏͏ digital͏͏ adoption,͏͏ has͏͏ created͏͏ an͏͏ ideal͏͏ environment͏͏ for͏͏ increased͏͏ M&A͏͏ activity.
Continue͏͏ Exploring:͏͏ VCs͏͏ flock͏͏ to͏͏ new-age͏͏ Indian͏͏ brands͏͏ as͏͏ they͏͏ tap͏͏ into͏͏ evolving͏͏ consumer trends
Anand͏͏ Ramanathan,͏͏ Partner͏͏ and͏͏ Consumer͏͏ Products͏͏ and͏͏ Retail͏͏ Sector͏͏ Leader͏͏ at͏͏ Deloitte͏͏ India,͏͏ stated,͏͏ “The͏͏ consumer͏͏ industry͏͏ is͏͏ a͏͏ key͏͏ driver͏͏ of͏͏ India’s͏͏ economic͏͏ strength,͏͏ with͏͏ the͏͏ FMCG,͏͏ retail,͏͏ and͏͏ e-commerce͏͏ sectors͏͏ serving͏͏ as͏͏ its͏͏ foundation.͏͏ To͏͏ sustain͏͏ this͏͏ growth͏͏ trajectory,͏͏ a͏͏ strategic͏͏ partnership͏͏ between͏͏ the͏͏ government͏͏ and͏͏ the͏͏ private͏͏ sector͏͏ is͏͏ vital.͏͏ We͏͏ require͏͏ reforms͏͏ that͏͏ directly͏͏ tackle͏͏ inflation͏͏ control,͏͏ credit͏͏ access,͏͏ and͏͏ the͏͏ ease͏͏ of͏͏ doing͏͏ business.͏͏ Policies͏͏ that͏͏ incentivise͏͏ R&D,͏͏ promote͏͏ health,͏͏ and͏͏ improve͏͏ rural͏͏ infrastructure͏͏ will͏͏ be͏͏ transformative.
With͏͏ an͏͏ appropriate͏͏ policy͏͏ framework͏͏ in͏͏ place,͏͏ India͏͏ is͏͏ poised͏͏ to͏͏ become͏͏ the͏͏ world’s͏͏ third-largest͏͏ consumer͏͏ market͏͏ by͏͏ 2030,͏͏ significantly͏͏ impacting͏͏ the͏͏ economy͏͏ and͏͏ the͏͏ livelihoods͏͏ of͏͏ millions.
Initiatives͏͏ such͏͏ as͏͏ establishing͏͏ a͏͏ dedicated͏͏ consumer͏͏ sector͏͏ council͏͏ focused͏͏ on͏͏ innovation,͏͏ digital͏͏ transformation,͏͏ and͏͏ supply͏͏ chain͏͏ efficiency͏͏ could͏͏ accelerate͏͏ our͏͏ progress͏͏ towards͏͏ achieving͏͏ the͏͏ US$2͏͏ trillion͏͏ consumer͏͏ market͏͏ milestone͏͏ and͏͏ securing͏͏ our͏͏ position͏͏ as͏͏ the͏͏ third-largest͏͏ consumer͏͏ market͏͏ by͏͏ 2030.
The͏͏ government’s͏͏ role͏͏ in͏͏ shaping͏͏ the͏͏ future͏͏ of͏͏ this͏͏ industry͏͏ through͏͏ supportive͏͏ fiscal͏͏ and͏͏ monetary͏͏ policies͏͏ will͏͏ be͏͏ crucial͏͏ for͏͏ driving͏͏ private͏͏ investment͏͏ and͏͏ consumption͏͏ to͏͏ meet͏͏ these͏͏ goals.”
Continue͏͏ Exploring:͏͏ India’s͏͏ consumer and͏͏ retail͏͏ sector͏͏ sees͏͏ surge͏͏ in͏͏ M&A͏͏ and͏͏ private͏͏ equity͏͏ deals,͏͏ up͏͏ 30%͏͏ in͏͏ Q1͏͏ 2024:͏͏ Grant͏͏ Thornton͏͏ Report
Harsha͏͏ V͏͏ Agarwal,͏͏ Senior͏͏ Vice͏͏ President͏͏ of͏͏ FICCI͏͏ and͏͏ Vice͏͏ Chairman͏͏ and͏͏ Managing͏͏ Director͏͏ of͏͏ Emami͏͏ Limited,͏͏ stated,͏͏ “The͏͏ Indian͏͏ consumer͏͏ sector͏͏ is͏͏ set͏͏ for͏͏ transformative͏͏ growth,͏͏ driven͏͏ by͏͏ rapid͏͏ innovation,͏͏ digital͏͏ adoption,͏͏ and͏͏ changing͏͏ consumer͏͏ preferences.͏͏ This͏͏ encouraging͏͏ trajectory͏͏ presents͏͏ significant͏͏ opportunities͏͏ for͏͏ the͏͏ FMCG͏͏ and͏͏ retail͏͏ sectors͏͏ to͏͏ expand͏͏ and͏͏ evolve.”
“To͏͏ tap͏͏ into͏͏ this͏͏ potential,͏͏ collaboration͏͏ between͏͏ the͏͏ government͏͏ and͏͏ businesses͏͏ will͏͏ be͏͏ crucial.͏͏ By͏͏ aligning͏͏ policies͏͏ with͏͏ emerging͏͏ market͏͏ trends͏͏ and͏͏ fostering͏͏ an͏͏ ecosystem͏͏ of͏͏ innovation͏͏ and͏͏ sustainability,͏͏ the͏͏ Indian͏͏ consumer͏͏ sector͏͏ can͏͏ become͏͏ a͏͏ key͏͏ partner͏͏ in͏͏ driving͏͏ India’s͏͏ economic͏͏ prosperity͏͏ and͏͏ creating͏͏ a͏͏ brighter͏͏ future͏͏ for͏͏ all͏͏ stakeholders,”͏͏ Agarwal͏͏ added.
Six͏͏ key͏͏ consumer͏͏ demand͏͏ trends:
1.͏͏ Surge͏͏ in͏͏ quick commerce:͏͏ Fueled͏͏ by͏͏ urbanisation͏͏ and͏͏ increasing͏͏ consumer͏͏ expectations,͏͏ the͏͏ quick͏͏ commerce͏͏ market͏͏ is͏͏ expected͏͏ to͏͏ experience͏͏ significant͏͏ growth,͏͏ emphasising͏͏ faster͏͏ deliveries͏͏ and͏͏ localised͏͏ e-commerce͏͏ strategies,͏͏ particularly͏͏ in͏͏ non-metro͏͏ cities.͏͏ According͏͏ to͏͏ the͏͏ consumer͏͏ survey,͏͏ 37%͏͏ of͏͏ consumers͏͏ prefer͏͏ quick͏͏ commerce͏͏ over͏͏ traditional͏͏ e-commerce͏͏ for͏͏ food͏͏ and͏͏ beverages,͏͏ as͏͏ impulse͏͏ purchases͏͏ or͏͏ immediate͏͏ needs͏͏ often͏͏ drive͏͏ these͏͏ items.͏͏ In͏͏ contrast,͏͏ home,͏͏ beauty,͏͏ and͏͏ personal͏͏ care͏͏ products͏͏ are͏͏ typically͏͏ planned͏͏ purchases,͏͏ leading͏͏ consumers͏͏ to͏͏ favour͏͏ e-commerce͏͏ in͏͏ these͏͏ categories.
Continue͏͏ Exploring:͏͏ India’s͏͏ quick commerce sales͏͏ surge͏͏ 280%͏͏ in͏͏ two͏͏ years,͏͏ expected͏͏ to͏͏ reach͏͏ USD͏͏ 9.95͏͏ Bn͏͏ by͏͏ 2029
2.͏͏ Affluent͏͏ versus͏͏ unaffluent͏͏ divergence:͏͏ A͏͏ significant͏͏ shift͏͏ in͏͏ consumer͏͏ behaviour͏͏ is͏͏ emerging͏͏ between͏͏ affluent͏͏ and͏͏ unaffluent͏͏ segments,͏͏ highlighting͏͏ a͏͏ clear͏͏ trend͏͏ across͏͏ various͏͏ consumer͏͏ goods͏͏ sectors.͏͏ In͏͏ the͏͏ FMCG͏͏ sector,͏͏ affluent͏͏ consumers͏͏ are͏͏ increasingly͏͏ selecting͏͏ larger͏͏ pack͏͏ sizes,͏͏ reflecting͏͏ a͏͏ rise͏͏ in͏͏ spending͏͏ capacity,͏͏ while͏͏ unaffluent͏͏ consumers͏͏ are͏͏ opting͏͏ for͏͏ downtrading.͏͏ This͏͏ broader͏͏ trend͏͏ of͏͏ upgrading͏͏ is͏͏ seen͏͏ in͏͏ affluent͏͏ markets,͏͏ where͏͏ higher͏͏ disposable͏͏ incomes͏͏ lead͏͏ to͏͏ a͏͏ preference͏͏ for͏͏ premium͏͏ products͏͏ that͏͏ offer͏͏ greater͏͏ value.͏͏ Conversely,͏͏ unaffluent͏͏ households͏͏ are͏͏ reducing͏͏ their͏͏ expenditures,͏͏ favouring͏͏ unbranded͏͏ or͏͏ more͏͏ affordable͏͏ options.
3.͏͏ Rising͏͏ demand͏͏ for͏͏ healthy͏͏ food͏͏ choices:͏͏ Consumers͏͏ are͏͏ increasingly͏͏ seeking͏͏ healthy͏͏ food͏͏ choices,͏͏ driving͏͏ demand͏͏ for͏͏ products͏͏ with͏͏ added͏͏ health͏͏ benefits,͏͏ such͏͏ as͏͏ fortified͏͏ cereals,͏͏ probiotics,͏͏ and͏͏ protein-rich͏͏ snacks,͏͏ with͏͏ approximately͏͏ 78%͏͏ willing͏͏ to͏͏ pay͏͏ a͏͏ premium͏͏ for͏͏ healthier͏͏ options.͏͏ Additionally,͏͏ there͏͏ is͏͏ a͏͏ notable͏͏ shift͏͏ towards͏͏ natural͏͏ and͏͏ minimally͏͏ processed͏͏ foods͏͏ as͏͏ Indian͏͏ consumers͏͏ become͏͏ more͏͏ aware͏͏ of͏͏ the͏͏ health͏͏ risks͏͏ associated͏͏ with͏͏ ultra-processed͏͏ items,͏͏ which͏͏ are͏͏ linked͏͏ to͏͏ obesity,͏͏ diabetes,͏͏ and͏͏ heart͏͏ disease.͏͏ This͏͏ awareness͏͏ has͏͏ contributed͏͏ to͏͏ a͏͏ decline͏͏ in͏͏ the͏͏ consumption͏͏ of͏͏ highly͏͏ processed͏͏ snacks.
Furthermore,͏͏ the͏͏ diversity͏͏ of͏͏ India’s͏͏ regional͏͏ cuisines͏͏ is͏͏ reflected͏͏ in͏͏ the͏͏ packaged͏͏ food͏͏ sector,͏͏ with͏͏ snacks͏͏ from͏͏ Gujarat,͏͏ South͏͏ Indian͏͏ spice͏͏ mixes,͏͏ and͏͏ Bengali͏͏ sweets͏͏ gaining͏͏ popularity͏͏ nationwide.͏͏ This͏͏ trend͏͏ signifies͏͏ a͏͏ growing͏͏ consumer͏͏ interest͏͏ in͏͏ authentic,͏͏ region-specific͏͏ flavours͏͏ and͏͏ a͏͏ preference͏͏ for͏͏ local͏͏ manufacturing,͏͏ indicating͏͏ a͏͏ return͏͏ to͏͏ roots͏͏ in͏͏ food͏͏ choices.
4.͏͏ Sustainability:͏͏ Consumers͏͏ are͏͏ increasingly͏͏ demanding͏͏ sustainable͏͏ products͏͏ and͏͏ are͏͏ willing͏͏ to͏͏ pay͏͏ a͏͏ premium͏͏ for͏͏ them,͏͏ prompting͏͏ companies͏͏ to͏͏ innovate͏͏ with͏͏ eco-friendly͏͏ packaging,͏͏ ethically͏͏ sourced͏͏ products,͏͏ and͏͏ personalised͏͏ offerings.͏͏ Additionally,͏͏ there͏͏ is͏͏ a͏͏ rising͏͏ demand͏͏ for͏͏ sustainable͏͏ food͏͏ options,͏͏ as͏͏ consumers͏͏ prefer͏͏ brands͏͏ that͏͏ adopt͏͏ eco-friendly͏͏ practices,͏͏ such͏͏ as͏͏ sustainable͏͏ sourcing,͏͏ minimal͏͏ packaging,͏͏ and͏͏ ethical͏͏ labour͏͏ standards.
5.͏͏ Clean͏͏ label:͏͏ Consumers͏͏ are͏͏ increasingly͏͏ seeking͏͏ products͏͏ with͏͏ minimal͏͏ and͏͏ recognisable͏͏ ingredients,͏͏ leading͏͏ to͏͏ a͏͏ rise͏͏ in͏͏ the͏͏ clean͏͏ label͏͏ trend͏͏ that͏͏ compels͏͏ brands͏͏ to͏͏ reformulate͏͏ their͏͏ offerings͏͏ by͏͏ eliminating͏͏ artificial͏͏ additives͏͏ and͏͏ preservatives.͏͏ For͏͏ example,͏͏ in͏͏ the͏͏ beauty͏͏ and͏͏ personal͏͏ care͏͏ sector,͏͏ 51%͏͏ of͏͏ consumers͏͏ are͏͏ willing͏͏ to͏͏ pay͏͏ a͏͏ premium͏͏ for͏͏ natural͏͏ ingredients.͏͏ The͏͏ clean͏͏ label͏͏ ingredients͏͏ market͏͏ experienced͏͏ a͏͏ CAGR͏͏ of͏͏ 20.7%͏͏ between͏͏ 2018͏͏ and͏͏ 2022͏͏ and͏͏ is͏͏ expected͏͏ to͏͏ maintain͏͏ its͏͏ growth͏͏ trajectory.͏͏ Driven͏͏ by͏͏ this͏͏ demand,͏͏ 5,000͏͏ clean͏͏ label͏͏ products͏͏ were͏͏ launched͏͏ in͏͏ India͏͏ in͏͏ 2023,͏͏ representing͏͏ 13%͏͏ of͏͏ global͏͏ product͏͏ launches.
6.͏͏ Expansion͏͏ of͏͏ private͏͏ label͏͏ brands:͏͏ Indian͏͏ retailers͏͏ are͏͏ increasingly͏͏ introducing͏͏ their͏͏ own͏͏ private͏͏ label͏͏ products,͏͏ often͏͏ priced͏͏ 25-40%͏͏ lower͏͏ than͏͏ comparable͏͏ branded͏͏ items.͏͏ This͏͏ shift͏͏ is͏͏ motivated͏͏ by͏͏ the͏͏ aim͏͏ to͏͏ provide͏͏ cost-effective͏͏ alternatives͏͏ that͏͏ resonate͏͏ with͏͏ price-sensitive͏͏ consumers.͏͏ In͏͏ India,͏͏ private͏͏ labels͏͏ account͏͏ for͏͏ 4%͏͏ of͏͏ total͏͏ retail͏͏ sales,͏͏ with͏͏ 70%͏͏ of͏͏ these͏͏ sales͏͏ coming͏͏ from͏͏ food͏͏ categories.
