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FMCG growth slows, big firms beat the market

By · Published by Everything Blog

In short

The quarterly slowdown hit both rural and urban areas as retail inflation and erratic kharif rainfall constrained overall consumer spending. Smaller enterprises struggled with shortages of commercial gas, stock, and packaging materials alongside a tough comparison base from post-GST inventory clearances. In contrast, large companies capitalized on their robust distribution networks to post strong volume gains, led by Marico's India business jumping 10%.

Key points

  • Listed industry leaders consistently outperformed the broader market by leveraging procur…: Listed industry leaders consistently outperformed the broader market by leveraging procurement and supply chain advantages over smaller rivals.
  • Rural and urban volume growth weakened simultaneously under pressure from rising food inf…: Rural and urban volume growth weakened simultaneously under pressure from rising food inflation and erratic rainfall affecting kharif production.
  • Deceleration affected all major product categories, with personal care volume growth drop…: Deceleration affected all major product categories, with personal care volume growth dropping to 3% while household care settled at 4%.

Sources checked by our analysis pipeline: 1

FMCG sales volume increased 3.6% during the quarter, down from 4.7% a year earlier, according to Worldpanel by Numerator. In contrast, listed companies reported strong growth. Hindustan Unilever posted 7% underlying volume growth, Marico's India business expanded 10%, Godrej Consumer Products reported an 8% year-on-year increase, while Nestle India recorded double-digit volume growth.

Also read: Dabur Global CEO Malhotra Resigns, as leadership churn in legacy FMCG companies continues

The divergence suggests that growth at larger companies is not necessarily translating into a broad-based recovery in consumption, with organised players potentially gaining share as smaller and regional competitors struggle with costs, supply constraints and weaker demand. "Smaller players appear to be losing ground to larger organised companies across most categories," said Mayank Shah, vice president at Parle Products.

The pressure could be particularly pronounced in rural markets, where a large part of the smaller, local FMCG industry operates and where consumption growth has also moderated. Unlike large companies with national distribution networks and stronger procurement capabilities, regional manufacturers often have less room to absorb cost increases or withstand disruptions.

Inflationary Pressures

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