Theme: FMCG | Premiumisation, e-commerce will continue to accelerate for the FMCG sector

In this State of the Economy year-end podcast on FMCG, businessline's Meenakshi Verma Ambwani speaks to Naveen Malpani, Partner and Consumer Industry Leader at Grant Thornton Bharat, to discuss the sector’s performance in 2024 and its outlook for 2025. FMCG industry is facing key challenges of inflation and urban slowdown. At the same time, green shoots in rural demand and rise in quick commerce channel have emerged as key opportunities for the industry.  Malpani explains that inflation has been a significant challenge in 2024 and to deal with rising costs, FMCG companies had to increase prices or reduce product sizes (shrinkflation). Food inflation has been the key factor that has led to sluggishness in urban demand.Malpani points out that while urban demand has been stagnating but recovery was visible in rural demand in the country on the back of good monsoon and government spending push. Urban markets, Malpani notes, have been under pressure due to stagnating demand driven by inflation and reduced discretionary spending among middle- and lower-middle-income groups. While affluent consumers continue to demand premium products, spending from middle-income households has been impacted. This has created a challenging environment for FMCG companies in urban regions. As the sector looks ahead to 2025, Malpani expects urban demand to remain subdued in the first half of the year, with a potential gradual recovery in the latter half. With the budget around the corner, there are expectations of rationalisation in the tax structure to stimulate demand. Stablisation in commodity prices will also help FMCG companies focus on volume growth. Another emerging opportunity in the FMCG space is the rise of quick commerce. While the global success of quick commerce has been mixed, it has been particularly successful in India. "Globally, quick commerce has not been a great success, but it has been a very good success story in India," Malpani explains. This success is largely driven by widespread internet penetration and the growing demand for convenience among urban consumers. Quick commerce companies are expanding their product offerings and increasing basket sizes for better margins.  Finally, Malpani highlights the importance of managing costs effectively. He points out that to achieve better growth in 2025, keeping prices stable, investing on technology and leveraging e-commerce including quick commerce channel will be key for FMCG companies.  Listen in!  (Host: Meenakshi Verma Ambwani; Producer: Siddharth Mathew Cherian) About the State of the Economy podcast  India’s economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders.