FMCG industry banking on urban demand recovery, premiumisation

The FMCG industry is banking on recovery in demand in urban regions while hoping to see higher sales growth in rural India in 2025. While quick commerce channels continue to gain in salience for the industry, premiumisation trends are also likely to further strengthen, senior industry executives said.

Mayank Shah, Vice President, Parle Products said, “We are very hopeful of recovery in urban demand in 2025. While March quarter may continue to be sluggish, there are expectations of revival in urban markets from June quarter. As far as rural regions are concerned, we are expecting good demand trends on the back of good monsoon, good Kharif season and expectations of a good Rabi crop, which will put more income in the hands of rural consumers. We also expect food inflationary trends to cool down from June quarter, which could lead to challenges seen in the past few quarters to subside.”

As per Kantar’s latest estimates, the FMCG industry witnessed volume growth of 4.5 per cent in urban regions in August-October in 2024 against a 6.9 per cent volume growth in August-October period in 2023. Value growth in urban regions was a tad higher at 6.4 per cent. With no signs of food inflation relenting in the immediate future, the research and insight firm believes urban regions will continue to see similar growth levels in the first half of the year.

Companies said they are also focusing on strategies to tap into the growth in rural demand. Mohit Malhotra, CEO, Dabur India said, “We expect recovery in urban demand as the year progresses. Premiumisation is expected to continue, and this will help improve value growth in 2025. Rural demand continues to outperform urban India and with the continued capex in infrastructure building by the government, this trend is expected to continue in the year 2025 as well. This will augur well for us as we have invested ahead of the curve to enhance our distribution footprint in the hinterland.” “Gone are the days when the rural consumer was content with using mustard oil and plain soap on her hair and skin. Today, she is seeking branded products like Dabur Amla Hair Oil and the Gulabari skin care range for her daily personal care needs. To meet this demand, we are expanding our product basket in the rural market by way of newer affordable pack sizes to feed these markets and push demand growth,” Malhotra added.

Tapping into the growing adoption of online shopping, led by quick commerce, will also be a key focus for FMCG companies. Parle’s Shah noted that the industry expects to see robust growth in e-commerce led by quick commerce over the next 2-3 years with the entry of new quick commerce players and expansion to new cities by existing players.

Aasif Malbari, CFO, Godrej Consumer Products Ltd, said, “In 2024, the FMCG industry showcased resilience, overcoming inflation and supply chain challenges while meeting strong demand for health-focused, personal care, and affordable products. E-commerce continued to thrive, with rural markets remaining steady.