FMCG Industry Seeks Revival In 2025 After Suffering From Food Inflation, Consumption Growth and Premiumisation Expected

The Fast-Moving Consumer Goods (FMCG) sector anticipates a revival in consumption growth in 2025, buoyed by easing inflation, premiumisation, and evolving consumer preferences.

This comes after a challenging 2024 marked by soaring input costs and a sharp rise in food inflation that hindered urban market growth in the latter half of the year.

Key commodity prices, including palm oil, coffee, cocoa, and wheat, surged significantly, prompting FMCG companies to implement price hikes of 3-5 per cent or resort to shrinkflation to maintain competitive price points.

Emami Vice Chairman and MD, Harsha V Agarwal, highlighted the impact of these pressures, stating, "Consumption among the lower-middle and middle-class segments has remained subdued, with approximately 75 per cent of average retail spending directed towards food and grocery, leaving only 25 per cent for discretionary purchases."

However, Agarwal noted signs of recovery, pointing out that food inflation had started to ease. “A revival in consumption growth looks promising, supported by a good crop and increased government spending on large-scale infrastructure projects and rural schemes in the December quarter,” he said.

Dabur India CEO Mohit Malhotra echoed these sentiments, identifying rising food inflation and subdued urban demand as key concerns in 2024.

"While rural demand has been growing quarter on quarter, we expect a recovery in urban demand as the new year progresses. Premiumisation is expected to continue, and this will help improve value growth in 2025," Malhotra added.

The trend of premiumisation, where consumers are willing to pay more for higher-quality products, is expected to gather momentum. Tata Consumer Products Ltd (TCPL) MD and CEO Sunil D’Souza remarked, "In India, consumer trends such as premiumisation, health & wellness, and convenience are expected to gather pace. Quick commerce has seen exponential growth, but physical distribution continues to stay extremely relevant."

D’Souza also highlighted the growing influence of Gen Z and millennial consumers. “By some estimates, they will contribute 76 per cent of consumption by 2030, presenting opportunities for products like healthier snacking and mini-meal options,” he said.

Marico MD & CEO Saugata Gupta emphasised evolving consumer behaviour, noting trends such as sustainability, personalisation, and premiumisation.

“The direct-to-consumer ecosystem continues to thrive, with digital-first and premium brands demonstrating resilience and growth. Innovation, affordability, and availability will be key drivers of growth going forward,” Gupta stated.

Godrej Consumer Products Ltd (GCPL) CFO Aasif Malbari shared a cautiously optimistic outlook for 2025. "The upcoming budget should consider proactive measures aimed at stimulating consumption in the larger economy. A consumption boost will lead to a cycle of sustained economic growth in the long run,” Malbari said.

Beverage giant Coca-Cola also reported resilience in 2024 despite challenging conditions. Sundeep Bajoria, VP Franchise Operations, India, said, "With rural India witnessing a demand upturn, our well-connected traditional and modern retail ecosystem, along with AI-powered tools like Coke Buddy, are expanding accessibility and convenience."

Experts underline the need for agility and innovation in the industry. KPMG Partner Pallab Roy noted, "The success of D2C brands has shown that Indian consumers are willing to try new brands at the right value proposition, experience, and purpose alignment."

Despite inflationary pressures and rising costs, FMCG players remain optimistic about the year ahead. A combination of favourable government policies, infrastructure investment, and emerging consumer trends is expected to drive growth, ensuring the sector remains on an upward trajectory in 2025.