We all have heard about the slowdown in the fast-moving consumer goods (FMCG) sector recently, and the main reason for this slowdown is the declining consumer demand in urban areas. According to Varun Beri, Managing Director, Britannia Industries, this slowdown is being felt especially in metros. Let us know in detail in this article how rising housing costs and low wage growth have affected urban consumer spending and how FMCG companies are coping with it.
Slow growth of FMCG: What are the main reasons?
Varun Beri of Britannia recently told in a call that there has been a decline in consumption in urban areas, which has affected the FMCG industry. The expenditure of consumers living in metros is increasing, but the salary increase is not that much, which has affected their purchasing power.
1. High rental and low wage growth
Housing costs in urban areas have increased significantly in the present times, accounting for about 22% of the overall Consumer Price Index (CPI). In addition, high rents and low wage growth have suppressed the budgets of most urban consumers. This is the reason why the demand for FMCG has decreased.
2. Impact on urban workers
This has had a profound impact especially on non-salaried and low-wage workers. The non-salaried class has seen a growth of only 3.4% in the last 12 months, while the salaried class has seen a growth of up to 6.5%. However, this growth in income has still proved to be inadequate for more than 51% of workers in urban areas.
3. Slow sales of branded products
Sales of branded daily needs goods have been declining for some time, especially in metros. The surge in sales of packaged foods during the pandemic has now normalized.
Difference between rural and urban areas
Sales of FMCG products in rural areas have remained stable. In fact, in the last three quarters, FMCG sales in rural India were higher than in urban areas, which was a positive sign. But now urban demand is declining, which is a big change.
4. Stability in rural areas
There has been no major fluctuation in the sales of FMCG products in rural areas. Rural demand has remained stable, especially due to purchases related to agricultural production.
5. Decline in urban demand
On the other hand, in urban areas, especially in metro cities, there is a decline in the demand for FMCG products. The reason for this is the increasing expensive habits of urban consumers and reduction in their income.
What is the way forward?
Big FMCG brands like Britannia are now trying to keep their business stable through price hikes. However, they want to ensure that the price hike does not further reduce the purchasing power of the consumer, so the price hike is being implemented carefully.
6. Control on price hikes
Britannia plans to increase prices by 4-5% in the upcoming quarter, but the aim is to maintain product quality and consumer experience.
7. Focus on long-term growth
Varun Beri also said that the company’s focus is not only on quarterly results, but on long-term stability. He is confident that this strategy will keep the company’s business strong.
Changing consumer trends
The mind of the modern Indian consumer has changed. Now they do not spend only on basic needs, but their shopping habits have changed. Now people shop by looking at different options, and FMCG companies are facing this.
8. Growing options
Now Indian consumers have many other options apart from home and personal care goods. For example, they have technology, lifestyle and many other areas on which they are spending their savings.
9. High aspirations
Now consumer aspirations have also increased. They are not only adopting affordable items but also premium products. This change has become a challenge for FMCG companies.
Future path for FMCG industry
The FMCG sector will have to face many changes in the coming times. To overcome the decline in urban demand, companies will have to turn to new markets. Apart from this, they will have to innovate products by understanding the changing habits of customers.
10. Innovation in products
Brands should no longer rely only on traditional FMCG products, but they will have to offer new products and services that can meet the changing needs of consumers.
11. Role of digital marketing
Nowadays is the era of digital marketing. FMCG companies should focus on increasing their digital presence so that they can reach new consumers. Increasing the use of social media and online platforms will be very important.
Conclusion
This is a challenging time for the FMCG industry, but it is also an opportunity. Companies can overcome this slowdown if they move in the right direction and innovate products and services in line with the changing habits of consumers. With the right strategy and smart decisions, this industry can pick up pace again.
12. FAQ:
1. What is the main reason for the slowdown in the FMCG industry?
The main reason is the decline in consumer spending in urban areas, especially due to high rentals and low wage growth.
2. How did Britannia handle the decline in urban demand?
Britannia increased prices , so that the supply chain costs can be covered and profits can be maintained.
3. Is the demand for FMCG increasing in rural areas?
Yes, the demand for FMCG products in rural areas remains stable and growth continues in these areas.
4. What changes should FMCG companies make in their products?
FMCG companies should make changes according to innovation, better product quality and changing consumer requirements.
5. How has the decline in consumption of urban consumers affected other industries?
The decline in consumption of urban consumers can also affect other industries such as retail, electronics, and transport.