At the consumer level, the reforms are unambiguous: eating, cooking and grooming just got cheaper. From parathas to shampoo, from butter to biscuits, households will feel immediate relief in their monthly baskets. Analysts expect that if brands pass on the full benefits, discretionary demand could surge in the run-up to Navratri and Diwali, creating one of the strongest quarters for FMCG in recent years.

Key GST Reforms for FMCG & F&B

• Staples now tax-free (0%): chapatis, rotis, parathas, packaged paneer, UHT milk, khakhra, pizza bread.
• Personal care at 5% GST: hair oil, shampoo, toothpaste, shaving creams, toiletries.
• Dairy at 5% GST: butter, ghee, cheese, spreads.
• Processed foods & snacks at 5% GST: namkeens, biscuits, sugar confectionery, jam, fruit jellies, tender coconut water, beverages containing milk, ice-cream.
• Baby and household products at 5% GST: diapers, napkins, feeding bottles, utensils.
• Inflation impact: consumer inflation may soften by up to 1.1 percentage points, creating headroom for stronger consumption.

With the recent GST overhaul setting the tone for tax reforms, it’s a pivotal moment to assess its implications for the FMCG and F&B sector. Below are insights and perspectives from industry experts, highlighting their views on how the revised rates will influence consumption patterns, pricing strategies, and overall market sentiment. From expectations of stronger rural demand to sharper competitive play among large and emerging brands, these outlooks capture the sector’s anticipation of how the policy rollout will translate into on-ground impact.

Bhuvaneswari Nara, Vice Chairperson & Managing Director, Heritage Foods

“The GST recalibration for India’s dairy industry is very welcome and timely. Moving everyday staples like paneer to the 0% slab, and ghee, butter, and cheese from 12% to 5%, will have a broad impact, as these categories touch nearly 100% of Indian households.

Not only do these essentials lighten the monthly grocery bill, but the reforms also help high-quality, branded products compete effectively with unorganized and unregulated producers. This shift strengthens formal supply chains, builds consumer trust, and supports more nutritious diets. Dairy products such as paneer, butter, and ghee are staples in every Indian kitchen, yet rising prices have forced many families to switch to cheaper substitutes that lack similar nutritional value.

In light of this, we at Heritage Foods are happy to announce that we shall be passing on the full benefits of these reforms to our consumers, helping boost the festive mood in our markets. We are also working with our partners and distributors to manage the transition smoothly and will be looking to ramp up capacity to capture the expected market expansion. We are also working closely with our distributors and retail partners to manage the transition smoothly and effectively.”

Paresh Parekh, Partner & National Leader for Tax – Consumer Products and Retail Sector, EY India

“GST reforms and rate rationalisation for consumer and retail sector, including everyday household daily items, FMCG goods,  electronics etc. is an extremely needed, welcome, timely, and bold move from Government.
 
The tax cuts are expected to directly lower consumer prices, offering significant relief to households, especially in rural and semi-urban areas where FMCG spending is sensitive.   For smaller product packs, companies may offer more quantity instead of reduced prices, passing value to consumers in a different form. The reform is widely expected to revive consumption demand, especially during the festive season, as daily-use goods become more affordable. Businesses estimate observable impact across domestic and rural markets, unlocking growth in packaged food, personal care, and staples.
 
Additionally, administrative measures such as faster three-day GST registrations for non-risky businesses and a 7-day refund window for export-oriented sectors — including textiles — are expected to significantly ease compliance and cash flow issues.
 
Faster refund processing, especially for exporters, will alleviate liquidity constraints common in the textile supply chain, helping in smoother operations and timely production. Garments and footwear priced up to Rs. 2,500 have been moved to the 5% slab, down from previous 12% or 28% rates—an immediate boost to affordability. While budget items enjoy relief, the decision to impose 18% GST on garments above Rs. 2,500 has drawn some concern. Industry players argue this could hurt middle-class consumers and handcrafted apparel segments like wedding attire and winter wear, potentially undermining the gains from simplification.

FMCG Distributors will have to evaluate potential supply-chain disruptions and may expect the government to issue clear guidelines on pricing and input tax credit (ITC) during the transition. Without structured guidance, benefits may not uniformly reach retailers or consumers, and outdated stock at previous tax rates may complicate compliance and margin flows.
 
The next steps for businesses is to quickly analyse,  where and on which products precisely rate reduction/revision has happened, and whether and where they are sitting with huge ITC (input credits) on capital goods, etc.
 
Also, businesses should analyse where possibly “Incentives clawback” may reduce where there is a rate reduction and incentives are linked to GST rates.”

Jitin Makkar, Senior Vice President & Group Head, Corporate Sector Ratings, ICRA Limited

“The GST rate cut on key FMCG categories is expected to stimulate consumption, at a time when demand impulses, particularly in urban markets, have lost sheen. Lower shelf prices on everyday essentials such as packaged foods, personal care items, and household products will likely drive volume growth and improve consumer sentiment. For companies, this could translate into higher throughput and better inventory turnover, especially ahead of the festive season. If demand accelerates, it will also benefit allied sectors such as packaging, distribution, and retail networks. While companies will need to manage competitive pricing and margin dynamics, the real benefit lies in expanding market penetration and accelerating demand recovery.”

Retailers Association of India (RAI)

Positive Developments 

RAI appreciates the removal of the inverted duty structure across the textile value chain, which brings much-needed clarity, balance, and predictability to the industry. 

Key Concerns Raised by RAI 

Despite the positive changes, RAI has highlighted some concerns regarding specific  categories and structural issues: 

Structural Flaws in Price-Based GST Slabs 

RAI strongly recommends moving to a flat GST rate across product categories rather  than relying on price-based thresholds, which: 

• Create distortions and promote grey market activity 

• Lead to misreporting and compliance challenges 

• Harm organised retail, especially for mid- and premium-priced products

• Discourage domestic manufacturing, undermining Make in India 

• Create artificial barriers that force consumers to downgrade instead of expanding natural demand.

Harsh Vardhan Gupta, Co-Founder & CEO – India, MatchLog Solutions

“The GST relief on freight and carriage services is a decisive boost for the logistics sector. Bringing down the tax rates will ease operating costs for transporters, exporters, and fleet operators, making cargo movement more efficient across the country. It also creates the right environment for faster adoption of digital and technology-led models that can optimize turnaround times and reduce inefficiencies in the supply chain. At MatchLog, we believe this move will act as a strong catalyst in scaling smarter, greener, and more sustainable logistics solutions, aligning well with India’s broader push towards supply chain modernization and decarbonization.”

Deepak Jolly, Chairperson, The Indian Food & Beverage Association (IFBA)

“This move is set to be a great boom for the food sector, driving growth, affordability, and innovation. It will also create new opportunities for startups, simplifying compliance and giving young F&B entrepreneurs the confidence to scale their ideas. At the same time, this reform will benefit the wider food industry as well as healthcare, by making nutritious, safe, and convenient products more affordable and accessible to millions of Indian families.”

IFBA and its team have been working on the barriers of growth for the food industry and have represented the case for food product categories on the strength of ‘Research Based’ narratives to assert with several stakeholders across the country who were a part of either “The GST Fitment Committee” or ‘The GST Council’ for GST Rationalisation for the F&B industry. Building on insights from IFBA’s February 2024 Landscape Study of the Breakfast Cereals Sector, which underscored affordability and accessibility challenges, the Association sees this move as a direct response to long-standing calls for lower taxes on cereals, supporting wider access, formalisation, and responsible growth of India’s packaged foods ecosystem.”

Simranjeet Singh, Director, CYK Hospitalities

“The GST rationalisation represents an uplifting change for any startup or emerging brand in the F&B industry, as it promises an easier working life. Up until now, the multiplicity of tax slabs has posed serious troubles for the young entrepreneurs to construct a transparent price structure, to remain in compliance, and to contend with such buying customers who are cost-conscious. Two slabs with 5% for essentials and 18% for anything else enhance the clarity of choice when operating a new venture and deciding on product mix and expansion strategy. Greater transparency reduces compliance costs and gives confidence to investors in scalable F&B models. The product on a lower slab is beneficial for startups, as cheaper products create demand for QSR concepts, cloud kitchens, and packaged foods, whereas premium concepts purchase on the higher slab. Thus, by way of creativity, the reform empowers the ecosystem through ingenuity, credibility, and promising avenues of growth for entrenched players as well as burgeoning entrepreneurs.”

Abhay Parnerkar, CEO, Godrej Foods Ltd.

“The decision to reduce GST on products like frozen foods, meats, and to exempt Indian breads altogether, is a progressive move that strengthens both consumer confidence and industry momentum. Lower taxation will translate into greater affordability, increased consumption, and broader opportunities for the food sector to expand reach and invest in new product development. Importantly, these measures will also reinforce value creation across the farm-to-fork ecosystem by boosting farmer incomes, improving processing efficiency, and widening retail access. Together, they highlight the government’s commitment to building a resilient and future-ready food economy for India.”

Vikram Marwaha, Joint Managing Director, DRRK Foods

“The recent reduction in GST on essentials such as soaps, oils for hair etc (from 12-18% to 5%) is a welcome relief for households that are able to afford some daily items and as this measure promotes savings particularly in the rural and semi-urban areas. With the festive season just around, this action could trigger consumer sentiment moving more readily to an uptick in FMCG demand.

At DRRK Foods, we see this as an opportunity to have essentials, including basmati rice, more in the hands of consumers, while being committed to quality and trust in the organised retail. Our best estimate is that consumers can expect an effective price decline for these essential goods of circa 7-13% which is considerable in terms of household savings.”

Dushyant Singh, Founder, Coffee Sutra

“As someone closely involved in India’s coffee journey, I thank our Finance Minister, Nirmala Sitharaman, and view GST 2.0 as a real turning point for our industry. Bringing GST on coffee and food bills down to 5% is not just a fiscal reform but also a structural boost that addresses some of the biggest hurdles specialty roasters and cafés like Coffee Sutra face. Coffee, which once began as a lifestyle product, has steadily transformed into a household essential. From morning brews at home to café culture across cities, the love for coffee has grown tremendously. By reducing the GST, more people will now have the opportunity to explore and enjoy better quality coffee at a fairer price. Today’s customer is informed, aware, and values what goes into their cup. With this tax reform, introducing them to freshly roasted, farm-sourced, and well-crafted coffee becomes even easier. It empowers both consumers and businesses, as consumers get value, and coffee brands gain the chance to reach a wider audience. GST 2.0 is a welcome step that combines affordability, accessibility, and growth, providing the momentum India’s coffee industry needs right now.”

Meenakshi Kumarr, Founder, Roots Café by Rural Mitra

“The two-slab shift through the new GST reform of 5% and 18% seems like a positive step towards simplicity as well as transparency. As someone working in the food, café, and hospitality space, I see this reform as a welcome step towards simplification and transparency. It will reduce confusion for both businesses and consumers, especially small entrepreneurs like us who often struggle with compliance and price balancing. This consistency will assist small business owners in creating menus, determining reasonable meal costs, along with increasing focus on providing consumers with an improved experience.

However, the government must keep in mind regarding the small business owners to ensure that the essential categories, especially those that are centered on sustainable and farm-to-table initiatives, are not severely impacted.

This strategy will ensure that the new changes foster innovation in addition to enhancing operations, promoting ethical sourcing, and assisting business owners who are working to significantly transform India’s food and hospitality sector.”

Ajaypal Rathore, Chief Finance Officer, Burger Singh

“The revision in GST rates is a welcome step for India Inc. This move is expected to boost demand, help curb inflation, reduce the tax burden across the supply chain, and should significantly lower disputes related to applicable tax rates. At this stage, limited information is available in the public domain, so it would be premature to quantify the financial impact of the GST rate revisions on businesses. However, it is widely expected that products in the Food and Beverages category will become more affordable and accessible.”

Vikrant Batra, Co-Founder, Café Delhi Heights

“As a committed member of the restaurant industry and founder of a homegrown brand, I sincerely appreciate the recent GST reforms introduced by the Government of India. These measures are undoubtedly a step in the right direction and reflect the government’s intent to ease financial pressure on households. They promote affordability and are aligned with broader public interest.

However, from the perspective of the restaurant sector, the reforms offer only limited relief. While we welcome the rationalization of rates, the absence of provisions around Input Tax Credit continues to be a missed opportunity. For restaurants, especially in the standalone and mid tier space, the denial of ITC impacts margins and restricts the ability to reinvest in operations, innovation, and growth.

That said, we remain encouraged by the government’s ongoing engagement with the industry. We hope that future reforms will take into consideration the specific needs of the F&B sector and create a more enabling ecosystem for sustainable development.”

Deepak Sahni, Serial Entrepreneur & Investor, Founder, Healthians

“This GST overhaul is not only about slashing taxes but is also about shifting the game. The exemption on health insurance and reduced GST on fitness services signal a much-needed shift from reactive care to preventive health, something India has long needed. What stands out is the balance: while families get relief on critical healthcare and nutrition, harmful products remain untouched. This not only reduces the financial strain on households but also nudges the country toward healthier living. It opens up a stronger ecosystem where affordability, innovation, and accessibility can grow hand in hand. When prevention becomes affordable, we’re helping families steer clear of illness, not just react to it.”

Mandeep Singh, Managing Director, Arabian Delites

“The recent GST reforms on restaurant billing and essential ingredients are a welcome and progressive step for the food and beverage industry. By simplifying taxation and easing the cost burden on raw materials such as grains, oils, and fresh produce, the reforms give F&B players like us the flexibility to manage expenses more efficiently and plan better for the long term. Reduced input costs directly translate into greater freedom for businesses to source fresher, higher-quality ingredients, while keeping menus fairly priced and diverse. This balance allows us to serve customers better without compromising on taste, nutrition, or authenticity that Arabian Delites is known for.

Equally important is the move toward a more transparent billing system. When diners clearly see the value of what they are paying for, it fosters stronger trust and confidence between industry players and consumers. The clarity in pricing not only benefits customers but also strengthens the credibility of businesses operating in an increasingly competitive market.

Overall, these reforms set the stage for a healthier ecosystem where both restaurants and diners benefit. Businesses can focus on innovation, quality, and service, while customers enjoy authentic, high-quality dining experiences at fair prices. It is a step that supports growth, sustainability, and accessibility across the industry.”

Anant Goel, Founder & CEO, Handpickd

“We warmly welcome the government’s decision, which will significantly enhance consumer affordability and benefit our entire ecosystem. While fresh produce rightfully remains at nil GST, the rate cuts on dairy and processed foods are a monumental win for the entire value chain. This not only makes wholesome products more affordable for families but also directly boosts the income of farmer producer organizations. For Handpickd, this is a catalyst to strengthen our mission: connecting our customers to the best of what our farmers produce with unparalleled transparency and value.” 

Aayush Madhusudan Agrawal, Founder & Director, Lenexis Foodworks

“The GST reforms mark a landmark shift for the food services sector. With restaurant meals now taxed at a flat 5%, dining out becomes more accessible for consumers at a time when festive demand is set to rise. The rationalisation of rates across core inputs like food ingredients, packaging, and equipment will ease operating costs and improve business confidence. For Lenexis FoodWorks, these changes provide a strong platform to deliver greater value to our customers and scale more ambitiously in the months ahead.”

Chef Harsh, Founder, Boom Burger

“The new GST reforms are somewhat of a hit or miss move for F&B brands like ours. By cutting down to just two main tax slabs, 5% and 18%, the government has simplified compliance and lowered costs across the supply chain. While we, the producer, fall into the 5% category, online delivery platforms have to adhere to the 18% slab.

At Boomburger, many of our everyday essentials now fall under the 5% bracket, which directly reduces input costs. That means we can channel savings into better quality ingredients, innovation, and keeping our pricing attractive for customers.

However, online platforms like Zomato and Swiggy have to charge 18% GST so that essentially offsets our potential gains. While our burgers may become cheaper to produce, higher platform fees will definitely deter customers from ordering in, given how price sensitive the Indian market is. It’s a balance we’ll have to navigate carefully.

For diners, one of the most exciting changes is the drop in GST on eating out. A burger meal that earlier had 12 – 18% GST will now carry just 5%, making dining more affordable and encouraging people to step back into restaurants again.

Overall, these reforms feel like a step in the right direction. By reducing complexity for operators like us and improving consumer value, it gives quick-service brands the chance to scale faster while staying competitive.”

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The two-day congregation will set the stage for some intriguing discussions and conversations led by industry experts and new-age entrepreneurs to uncover the collaborative disruptions made by the industry over the years. One of the largest B2B events will be hosting the end-to-end of food business enablement – from product sourcing, and retail tech innovation trends to grocery retailing & food service best practices.

The event will be led by Damodar Mall (CEO – Grocery, Reliance Retail), as Chairman, India Food Forum – Food Retail, and Chef Manjit Singh Gill, President, Indian Federation of Culinary Associations (IFCA), as its Chairman, HoReCa Convention.

The mega business event will connect participants through deliberations on some gripping topics such as transforming supply chains with technology, collaborative strategies for the phygital growth era, mastering the cycle of food entrepreneurship and much more. With an impressive lineup of presentations, fireside chats and panel discussions, the conference will host 500+ brands, 100+ exhibitors, 300+ industry experts and 3000+ attendees for an endearing experience.

Commenting on the 17th edition of the India Food Forum, Nikhil Behl, CEO – Food Business, IMAGES Group shared, “The world over, we are seeing the powerful outcomes that result when food brands, retailers and HoReCa businesses collaborate to not just push consumption, but also to spotlight product innovation, better diets and consumer health. Throughout its history, India Food Forum has been the hub where many game-changing partnerships have been launched, and this focus on collaboration is our central mission this year. ”

Among the 300+ speakers at India Food Forum 2024 are: Aastha Almast (CEO & Co-founder, The New Shop), Abhishek Bindal (COO, Aditya Birla New Age Hospitality), Ajay Thandi (Co-founder, Sleepy Owl Coffee), Amir Majali (Founder & CEO, TruFalafel, Karak Enterprises), Amrut Mehta (Director, The Little Italy Group), Amrish Arora (MD, Fountain Hospitality), Ankit Patel (CEO, The Belgian Waffle), Anju Srivastava (Founder & CEO, Wingreen Farms), Anuj Singh (MD & CEO, Spencer’s Retail), Anurag Katriar (Founder & CMD, Indigo Hospitality), Dr. AK Tyagi (ED, Haldiram’s), Harpreet Tibb (Promoter, Tibbs Frankie), Lalit Jhawar (Co-founder & COO, Food Square), Sairam Krishna (COO, Instamart Swiggy), Saurabh Kalra (MD, McDonald’s India – West & South), and Murali Krishnan (Co-founder & CMO, Wow! Momo Foods), among others.

Other highlights include Future Forward Brands felicitation ceremony, the Star Progressive Grocers honours, the annual Coca-Cola Golden Spoon Awards and Pepsi IMAGES Food Service Awards celebrations.

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Increased allocation for rural infrastructure: Improved rural infrastructure like roads and cold storage facilities could enhance supply chain efficiency and reduce wastage, potentially increasing demand by 10-15% and generating 1-2 million jobs in construction, logistics, and related sectors. This could include jobs in building roads, operating cold storage facilities, and managing agricultural supply chains. MDs/CEOs of several prominent FMCG firms have already expressed concerns about the slowdown in rural demand

Support for domestic manufacturing: Incentives for local production of raw materials and packaging through initiatives like the Production Linked Incentive (PLI) scheme for the food processing industry can attract investments of Rs. 5,000-10,000 crore and create up to 1 million jobs in manufacturing and allied sectors. For instance, the PLI scheme for food processing has the potential to create 5 lakh jobs in food processing units and related industries

Direct benefit transfers: Schemes like subsidies for LPG (cooking gas) cylinders and Ujjwala Yojana can increase disposable income and drive demand by an estimated 5-7%, leading to indirect job creation in various consumer-driven sectors like agriculture, retail, and manufacturing.

In urban and tier-1 cities, the number of gig workers has been steadily rising wherever e-commerce and hyper-local delivery have grown. Governments must endeavor to have labor laws recognize the gig economy as a legitimate workforce. The developing digital economy and its labor force would suffer if a legislative framework for gig workers is not swiftly established.

Retail:

Simplification of GST for online and offline businesses: A unified and simplified GST regime can create a level playing field and boost compliance, potentially increasing formalization in the retail sector by 15-20%, impacting the sector by Rs. 15,000-20,000 crores.

Relaxation in FDI norms for multi-brand retail: Allowing greater FDI in multi-brand retail could attract Rs. 20,000-30,000 crores in investments and create 1-2 million jobs.

Infrastructure development for e-commerce: Improvement of logistics and delivery infrastructure across India can benefit both e-commerce businesses and consumers, potentially reducing delivery costs by 10-15% and expanding the e-commerce market by Rs. 20,000-25,000 crores within 3 years. This could lead to significant job creation in e-commerce logistics, warehousing, and related sectors.

By 2027, internet penetration is expected to reach 80%. 60% of MSMEs use e-payments, such as online banking and UPI. By 2027, e-payment penetration is expected to reach 70%. But only 6% of MSMEs actively sell through e-commerce platforms. Approximately 4 million digital suppliers may generate approximately 35 million new jobs by FY2027. To promote digital commerce, the government ought to invest heavily in ONDC and digital infrastructure development.

E-commerce:

Focus on digital infrastructure: Development of a robust national digital infrastructure with affordable internet access in rural areas can increase e-commerce penetration and create up to 5 lakh jobs in digital service delivery and rural e-commerce businesses.

Simplified regulatory framework: Streamlining regulations and promoting transparency in e-commerce platforms can boost investor confidence and attract Rs. 5,000-10,000 crores in investments, potentially creating 2-3 lakh jobs across the e-commerce ecosystem.

Skill development for the e-commerce workforce: Training programs for skills like digital marketing, logistics management, and data analytics can improve efficiency and attract a skilled workforce, potentially creating up to 1 lakh jobs in e-commerce specific roles.

Support for MSMEs in e-commerce: Initiatives like providing easier access to financing and training in online marketing can help small businesses leverage e-commerce platforms and create significant job opportunities in e-commerce enabled MSMEs.

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As the global economy experiences a deceleration, it becomes crucial to comprehend the factors contributing to India’s sustained growth and its advantageous position in the current scenario. There are three major promising and encouraging trend surfacing and strengthening India’s sustained growth narrative

One such aspect is the potential of Tier 2 cities. Accounting for 14% of India’s total population, T2+ cities already contribute 46% to the GDP, offering a significant boost to the Indian economy. T2+ cities are home to a majority of our MSMEs, and these small and medium enterprises play a crucial role in propelling India’s growth, contributing approximately 30% to the GDP. A parallel force in driving growth is the Indian startup ecosystem, which boasts the third-largest number of unicorns globally. This ecosystem is actively seeking to capture the consumer base in Tier 2 cities.

The second aspect of the growth is the changing income and consumption structure driven by the shift in the demographics. The presence of a substantial portion of the population can bring about several potential benefits, especially for the FMCG sector, with high level of consumption, early adopters for new technology and trends, more digitally engaged and significantly contributing to the workforce, impacting the overall economy.

And lastly rapid digital evolution, where India is in the forefront of transformative changes across various sectors, contributing to economic growth and innovation.

Against the backdrop of a continually fluctuating macroeconomic environment, the FMCG sector in India is confronted with a range of challenges and opportunities. Nevertheless, amid these intricacies, a promising and encouraging trend will strengthen the growth narrative of the FMCG sector in India.

The FMCG Landscape

According to NielsenIQ’s FMCG Retail Measurement Service (RMS), for 12 months ending Sep’23 (MAT Sep’23), the FMCG industry (FMCG + Non-alcoholic Beverages) in India is valued at Rs 6,51,375 cr, growing at a pace of 10.7%. This growth is largely consumption driven across the market.

The report further reveals that volume growth for the quarter is 8% higher than same period last year (i.e Q32022) NIQ, the world’s leading consumer intelligence company attributes the robust expansion of FMCG sector to increased consumption across the country.

Rural markets showing signs of recovery

Rural markets are showing signs of recovery, with consumption gradually picking up, while Urban market is growing faster and maintaining a stable rate of consumption growth. It is also observed, from a retail universe of about 11.5 million outlets across India, 42% of these stores spread in urban areas have seen an increased penetration while rural markets that account for the rest of the 58% retail stores had a slower growth.

Inflationary pressures and rising prices of essential goods along with uneven rainfall had impacted Rural growth and consumption. A recovery in rural areas is critical for FMCG companies, as it contributes to around 37% of the total FMCG sales. A thriving rural economy is also good for FMCG companies as the possibility of improving overall FMCG penetration grows.

Sustained and rapid growth for Modern Trade channel

Modern Trade is witnessing robust growth. The channel faced significant challenges during the pandemic but has experienced accelerated growth following the relaxation of pandemic restrictions and threats. For MAT Sept’ 23, the channel posted a growth of 22% over the same period last year, 2X faster than the growth from Traditional Trade channel.  The accelerated growth is not merely a result of a low base; rather, it is fueled by consumers reverting to pre-pandemic habits. Additionally, the consistent expansion of Modern Trade chains into new and emerging markets is a signifi cant driver of this rapid growth.

This growth in Modern Trade is largely driven by the non-top 8 metros. These metros have posted a growth of 28.5% for the period MAT Sept’23 over LY, while Top 8 Metros posted 16.8% for the same period.

This is also due to the rise of the regional Modern Trade chains growing faster and stronger than the National chains and expanding rapidly. Several factors contribute to the competitive edge of these regional players. They excel in focusing on the regional market and tailoring their offerings to meet the specific needs of local consumers throughout the seasons. Emphasizing private labels across various categories not only enhances their margins and bottom line but also positions them advantageously. Furthermore, owning their store properties rather than being situated in a mall or renting space provides an additional benefit.

E-commerce fueling rapid growth

Finally, e-commerce, the shift in consumer behavior post pandemic towards online shopping has been a major catalyst for the accelerated growth of e-commerce in FMCG. Convenience, time-saving, and the availability of a diverse range of products contribute to this changing trend. As more consumers embrace online shopping, especially for everyday products, the FMCG sector will experience a rapid transformation. This rapid growth in e-commerce FMCG is largely driven by Metro markets, while non metros are small but are growing gradually.

As per NielsenIQ E-Commerce Measurement Service (EMS), e-commerce share within the total trade in All India Metros (TC 1 towns) is 5.24% for MAT Sept’23, gained by 1.4% over same period last year.

What is driving consumers’ choice and spending intention?

Prolonged inflationary pressures have shaped calculated spending, as consumers evolve their habits aligned to recent inflation deceleration. But the compounding effects of years of disruption continue to keep consumers bracing for what’s ahead. While FMCG prices continued to rise in double digit in several countries, India was in single digits. Thus, across the globe, it is no surprise that rising food prices remained top of mind concern for consumers. India was no different as the Indian consumer too recorded this as a top concern, as seen in the Fig no. 4, 21% of consumers quoted “Rising food prices” as a top concern followed by “Global warming/environment” and “Increased housing cost”.

However, besides the food price rise, increasing utilities and economic downturn plagued the consumers globally while for Indian consumers it’s environment and housing costs that also propped up as sore issues. COVID-19 still lurks in India as one of the top 10 concerns while globally another concern that emerged was ability to provide basics for family.

Consumers are coping despite harsh realities persisting, with 43% of global consumers believing they will be better off as per the Midyear Consumer Outlook 2023 by NIQ. Indian consumers were far more optimistic about their financial situation with 79% believing they will be better off. Multiple consumer data points paint a picture of recovery and optimism. 21% of Indian respondents reported that they experienced job or income loss but feel they are back on track. Part of that confidence might be attributed to the lower rate of unemployment, both current and forecast, and even though we are experiencing tough economic conditions the silver lining is jobs opening up.

 Regardless of the upbeat outlook, 90% of consumers are employing multiple strategies to manage their spending and this is unlikely to change in the short-term. Budgeting and cutting back on discretionary spending are preferred approaches to manage finances. Therefore, innovation will continue to be important, regardless of cost pressures. Retailers could benefit from traffic-generating offers in key categories, while manufacturers could target dis-loyal and highly promiscuous brand shoppers with differentiated offers.

How are consumers managing their spending for the next 12 months?

Indian consumers have positive intentions on spending, but on key essential segment like Education, Savings/ Investment and Groceries as compared to the global consumers, who intend to prioritize on Grocery and In-home spending. In-home priorities prevail across the next 12 months as consumers continue to focus on the basics and extend coping behavior that dominated the last 3 years. There is an expectation that necessities will take up a bigger part of wallet spend such as education, groceries, savings/ investments, health care, financial services and utilities and therefore plan to spend less on OOH, salon and grooming, holidays, appliances, and similar discretionary type spending.  Beyond this high-level strategy of redirected spend, consumers are conscious of their spending and intend to seek out value as often as possible.

Consumers adopt multiple strategies to manage FMCG spendings.

Consumers are prioritizing their spending for the coming months as infl ation is still riding high for FMCG. They are also adopting various ways and strategies to manage their wallet when it comes to daily essentials, especially FMCG. Consumers are opting for a wide range of strategies to manage their grocery spending, ranging from shopping online to get better deals, to using digital technologies, monitoring the cost of overall basket, and even using loyalty points to manage spending. If we scroll over the list of strategies, most of these are fueling the emerging trends in retail.

Health needs, important to all

While health needs are universally significant, it’s crucial to tailor approaches for different markets. In the context of India, the hierarchy of top health concerns comprises environmental factors, physical health, sleep quality, emotional well-being, and dietary considerations, which diverges from the priorities observed in most other APAC markets, where physical health typically assumes precedence, followed by considerations related to sleep.

A trend-spotting survey conducted by NielsenIQ BASES has also identified the rise of Natural, Immunity, Holistic Wellness, and Sustainability as the prominent emerging consumer trends. Furthermore, when delving deeper into the realm of food trends, it becomes evident that consumers are showing an increasing preference for Food & Beverages that claim to be rich in nutrients and healthy ingredients or that claim to be healthier alternatives.

Examining the current brands available in the market that use healthy ingredients as a value proposition, we observe that these brands hold approximately 10% of the share in the Traditional Trade market. In the Modern Trade channel, the same brands command around 20% share and are experiencing robust double-digit growth.

What are consumers seeking in their Brands?

Now when it comes to consumable goods, exclusion of bad things (low sugar, low calories) is still among the most important factors in innovation. However, consumers seek more than that now. They’re willing to try new things if they are affordable when it comes to food but also with good quality ingredients.

For example, for things which are part of your daily basket such as Snacking and Confectionery, the idea of convenience needs to be there. These are more impulse and indulgent purchases; hence these factors matter. However, low calories, healthier ingredients, low sugar are the top attributes.

How to outperform in 2024 and beyond

In preparing for the journey ahead, it’s crucial to evaluate the forthcoming factors that will drive growth, maintain relevance, and foster imaginative thinking

• ADAPT to inflationary reality. Executing effective and consistent price management strategies is essential for preserving profitability during prolonged periods of inflation. Careful monitoring of consumer optimism becomes paramount, particularly in tandem with the impact of inflationary pressures and shifts in employment dynamics. It is imperative to align your brand seamlessly with consumers’ deeply ingrained habits, focusing on their judicious spending and saving strategies
• RESONATE with the consumer: Examining the economic segmentation of NIQ’s consumers to assess their “financial condition and future outlook” reveals a market polarization, with 46% of Indian consumers expressing a sense of vulnerability, while 54% adopting a cautious yet optimistic stance. This suggests a divergence in consumer spending, influenced by economic conditions. Observable changes in price tier dynamics highlight the continued significance of price as the primary factor in purchasing decisions. Therefore, industry players must acknowledge that private labels and local or regional brands will play a crucial role in the dynamics of the grocery market. Formulate strategies for coexistence rather than relying solely on price competition and differentiation, innovation, and carving out a unique space distinct from being perceived solely as a “cheaper alternative”.
• FOCUS on the “Healthy” proposition: Consumers are displaying a growing inclination towards seeking Food & Beverages products with reduced negative attributes, all while considering both the financial and physical benefits. This entails a profound consideration for addressing specific concerns, including the minimization of negative attributes associated with products. To meet and exceed these evolving expectations, it becomes imperative for businesses to infuse innovation into their offerings, ensuring that they resonate with the intricacies of individual consumer needs while simultaneously delivering holistic benefits that transcend the boundaries of financial and physical realms.
• BUILD a robust online strategy: Driven by the imperative to align with changing consumer preferences, leveraging the growth of e-commerce, and staying competitive in a digital-first business environment is crucial. It is a strategic imperative for FMCG brands to not only meet current consumer expectations but also future proof, as technology continues to shape consumer preferences and behaviors. FMCG companies and retailers leveraging digital platforms are poised for continued success in this rapidly changing market.

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