Future of FMCG in India: What Lies Ahead in 2023!

Authored by Chirag Patel, Co-Founder of Stratefix

The FMCG sector has experienced a tremendous shift over the past 10 years and is currently thought to be India's fourth-largest market. The FMCG market in India is expected to increase at a CAGR of 14.9% to reach US$ 220 billion by 2025, from US$ 110 billion in 2020. The following are some of the key determinants that will contribute significantly to the expansion and development of the industry in FY23:

1. Digitalization

Well over the past few years, digitalization has made sure of it anyway. With the use of digital technologies, FMCG firms are integrating dealer management, stock management, and vendors into a single ecosystem. FMCG firms are using capabilities of AI, Big Data, and predictive modeling more and more to forecast customer behavior with a high degree of accuracy and to truly comprehend what their customers are genuinely interested in. More individuals having access to the usage of internet and smartphones would make it easier for rural residents to access various e-commerce platforms for shopping online.

2. Supply Chain Management

As a result of the pandemic, supply and distribution experienced severe difficulties. It is crucial to maintain continuous orders from these channels in a nation where small Kirana stores still account for 80% of sales. Modern shops may safely make contactless orders with the use of a straightforward ordering app, which also provides insight into the execution of those purchases from order placement to logistics and supplies.

3. Sales to Consumers Directly

Brands are progressively being enticed by the profit margin involved with selling directly to customers to open independent online stores and sites along with direct digital sales platforms on different online markets. The bulk of FMCG companies have already benefited from the trend by supplying goods right to customers' doorsteps. Customers' demand has increased by 88% year over year for brands that have distinct websites for consumer sales in 2021. For FMCG firms, direct-to-consumer is emerging as a favored business strategy that will have greater significance in the coming years.

4. Selective Shopping the Way Ahead

With the vast array of options and the feasibility of buying things online with minimal face to face interaction, customers today have developed the habit of buying affordable and budget friendly items from discount stores rather than traditional ones. Additionally, with online shopping customers today prefer buying dupes that are less costly. Hence, selective shopping habits have now become an integral part of the customer’s buying behavior and the FMCG brands will have to adapt to it.

5. Service: Quality and Value

Customers today prefer to have an exceptional shopping experience with increased hospitality and best quality goods. The quality and value of the products determine the growth of an FMCG brand. While in times gone by maximum pressure was levied on general sales, but today brands prefer to have special emphasis on tertiary sales, ensuring that the customers gain a memorable shopping experience. From marketing to packaging of goods, it is ensured that the products offer maximum brand value and grasp the attention of the customers. This way they stay connected and loyal to the brand.

6. Governmental Actions and Investments

The government has made some significant moves to encourage further investment in the industry and provide new opportunities for international businesses. An impressive $18.19 billion in foreign direct investment (FDI) poured into India's FMCG sector in 2020. The govt's subsidies and FDI money have aided the sector in building a strong supply chain, boosting employment, and gaining great awareness for FMCG companies. Additionally, the PLI plan put forward in November 2020 proved to be very helpful for the industry in increasing production capacity and exports. In the coming years it is anticipated that the government would continue to push for the sector's development by alluring investments and programs.

Final Words

One important point is that consumers are becoming more eco-aware nowadays, and many are preferring businesses who are actively working to improve their sustainability. For Gen Z customers, this is their first option for a driver, and it is also becoming increasingly significant for older demographics. To make sure they stay relevant and competitive in the future, businesses need to incorporate eco - friendly packaging and procurement, clean energy, and plant-based choices into their marketing mix.

Budgets for R&D have a natural tendency to be slashed during difficult times. Innovation will, nevertheless, aid FMCG firms in navigating the altered market environment. Companies may create goods that promote value, volume, and sector growth by researching consumer demands, creating, and trying out new products that address these needs.