“There has been a consumption revival and renewed customer confidence in 2022, and we expect this demand improvement to continue into 2023,” said Juan Pablo Rodriguez, CEO, Hindustan Coca–Cola Beverages (HCCB).
New Delhi: Fast-moving consumer goods FMCG ) makers expect inflation to moderate in 2023 with green shoots in the impacted rural segment. Further, digitisation, premiumisation, and demand for packaged and ready-to-cook food are emerging as key drivers of growth as the industry enters the new year, shared industry leaders. Right through 2022, even as the customer became more frugal, price-conscious, and always looking for value for money, one of the ways in which businesses adapted was by reducing the grammage or size of unit packs while keeping the same price points, said Manish Aggarwal, director, Bikano, Bikanervala Foods. He added that brands tied up with local as well as online delivery platforms, thus resulting in the growth of the whole sector.
In 2023, he expects greater growth along with improved margins and profitability for FMCG companies on the back of softening raw material costs.
“There has been a consumption revival and renewed customer confidence in 2022, and we expect this demand improvement to continue into 2023,” said Juan Pablo Rodriguez, CEO, Hindustan Coca–Cola Beverages (HCCB).
Noting positive growth in premium segments, Saugata Gupta, MD, and CEO of Saffola edible oil maker, , said that the urban and premium discretionary categories are performing pretty well, despite the continued weakness of rural demand. “We anticipate a slow improvement in the cost and margin challenges as well as a possible improvement in rural sentiment in the upcoming year,” he added.
Sunil D’Souza, MD and CEO, Tata Consumer Products noted that brands that stay relevant to the consumer and deliver products that add value will have an edge. He shared that in addition to topline growth, balancing margins and staying nimble will be critical to achieving success for FMCG players.
“2023 will also see an upward graph for the FMCG market as this segment is completely dependent on demand. FMCG is one of the segments where demand can never go down, the growth percentages may definitely vary,” commented Ashish Khandelwal, MD, BL AGRO. He highlighted that the Bail Kolhu cooking oil maker is seeing huge demand and therefore, has set up a new manufacturing unit to double its production and fulfill the demand.
Inflation a challenge in 2023?
Commenting if Inflation will turn out to be a party spoiler in the new year similar to 2022, Vivek Gupta, head – essentials at Udaan said that India’s domestic consumption-driven economy will continue to play positively in the market. He highlighted that inflation easing along with strong measures such as higher infrastructure spending, the government’s focus on logistics and supply chain and a good monsoon will help in improving the overall consumer spending and sentiment.
Gupta from Marico commented, “As far as the inflationary scenario is concerned, we think the worst is over.” He added that while inflation in vegetable oils has settled a little, crude inflation also must settle so that the overall food inflation basket settles down.
“We expect to see a gradual improvement in the margin pressure and cost pressures. We believe that while consumption will improve, the improvement will be gradual as we get into the second half of the year.”
Commenting on rural markets, D’Souza said, “We are seeing some initial positive signs but will need to watch for a few more months before we can call it a recovery.”
Sharing lowered inflation numbers in November 2022, Rodriguez from HCCB said that according to the latest trends, the brand is optimistic that inflation will be under control in 2023. However, he added that the company is also prepared to brace any upward trends and volatility by leveraging its scale and volumes.
“We will be bracing up our supplies commensurate with the increase in demand and building capacity for 2023 and beyond, to help us drive larger volumes. In accordance, we have made impactful investments wherever we sensed demand and plan to continue this growth in the coming year,” he shared.
Contrary to popular belief, Sahil Dharia, founder & CEO of Soothe Healthcare, which makes paree sanitary pads said that he expects high inflation to be persistent through 2023, resulting in a challenging time ahead for brands, especially businesses that are majorly dependent on online channels. He added that next year, loyalty in the D2C space will be tested as brands reduce discounts in an effort to improve the bottom line because the online customer trends are fickle jumping marketplaces or picking the lowest denominator.
Harsha Razdan, partner and head, consumer markets and internet business, KPMG in India said, “Inflation continues to be the weak spot in India’s consumption story and volume growth will remain a challenge in the first half of 2023.”
Razdan added that given the current scenario, FMCG companies will require a more detailed understanding of how purchasing decisions are made in different markets and categories whilst getting pricing right. He highlighted that while D2C players continue to leverage their ability to connect closely to customers, conventional FMCG brands will need to offer benefits beyond serving as a connection point between manufacturers and consumers.
Premiumisation, packaged and ready-to-eat segment to drive growth
Manish Bandlish, MD, Mother Dairy Fruit & Vegetable said that the FMCG market is likely to continue with the same momentum in 2023 as it did in 2022 on account of increased demand for packaged products. He added that the increasing shift from unorganized towards organized segments coupled with digitisation is going to be a significant driving force in the growth of the FMCG sector in 2023.
Commenting on the demand for premium products, Gupta from Marico said that the urban consumption and premium segment are much better placed because the premium discretionary FMCG segment had a far lower base last year. He shared that Marico aims to deliver at least mid-single-digit volume growth in H2 and maintain its aspiration to deliver an 18-19 per cent EBITDA margin in FY23. “We have been driving growth through digitisation and premiumisation. In line with this, we expect our digital portfolio to keep growing every quarter till it reaches ₹450-500 crore mark in FY24,” he highlighted.
Tata Consumer’s D’Souza too shared that the company is focused on accelerating its growth businesses which include Tata Sampann in the pantry space, which sells pulses, spices, staples, RTC, dry fruits, NourishCo which plays in water and ready-to-drink segment, Tata Soulfull and Tata Sampann Yumside which include breakfast cereals, RTE, snacks, and Tata Simply Better in the plant-based meat category.
“We believe convenience food and RTE/RTC food category will see a positive uplift and grow faster as post-covid trends continue to factor in and more offices and educational institutes opening,” commented Akshay Modi, MD, Modi naturals adding that improving macroeconomic scenarios will lead to employment creation and thereby improve the consumption trends.
He highlighted that the company plans to launch new product categories in RTE and RTC space targeting young urban audiences with high disposable income.
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