India’s FMCG Sector
Growth, Consumer Shifts, and the Road Ahead
“India’s evolving consumer landscape reflects a shift from necessity to lifestyle, where digital influence and a growing middle class drive the future of consumption.”
India’s FMCG sector is growing rapidly, establishing itself as a key player in the Asia-Pacific region. The country has consistently achieved strong double-digit growth in this industry through modern retail channels. This sector plays a significant role in India’s economy, employing approx. 3 million people, which constitutes about 5% of total factory employment in the country . As India is projected to become the world’s third-largest consumer market in a few years , this sector is likely to experience unprecedented demand.
Some key statistics about FMCG sector in India-
- The market size of India’s FMCG sector in 2024 is expected to be $192 billion and is projected to grow to USD 665.63 billion by 2032 ; The annual growth rate is expected to be between 7-9% in 2024
- This sector ranks as the fourth largest in the Indian economy
Changing Consumer Preferences
India’s FMCG sector is experiencing a notable shift towards premium products, with the premium-plus segment now making up nearly 40% of total sales . The rise in disposable incomes is reflected in the growth of the packaged food market, expected to double to USD 70 billion in the coming years. Additionally, with rural per capita consumption set to grow significantly by 2030, there is a clear trend towards higher-quality and convenience-focused products. This evolving consumer behaviour underscores a shift towards premium and health-conscious choices in this sector.
The Role of Digitalization and E-Commerce
Digitalization has played a transformative role in the FMCG sector. There is a growing preference for digital shopping channels. During the pandemic, online FMCG sales increased by 50% year-on-year, as consumers preferred the convenience and safety of e-commerce over traditional shopping methods.
E-commerce alone accounts for 17% of total FMCG consumption , with affluent consumers spending an average of $66.12. Increased accessibility, combined with the convenience of online shopping and home delivery options, has led to a substantial shift in consumer behaviour and demand. Moreover, rising consumption in rural areas, which accounts for 36% of total FMCG spending, has been crucial to the sector’s success.
Sustainability and Eco-Friendly Trends
A new shift has been recognised among the Indian consumers. There is a noticeable rise in demand for eco-friendly products and sustainable packaging within the FMCG sector as consumers increasingly prioritize environmental sustainability. Prominent brands like Hindustan Unilever and Coca-Cola India have taken significant steps in this direction. For example: Hindustan Unilever’s commitment to ensuring that all of its plastic packaging is recyclable, reusable, or compostable by 2025 shows corporate responsibility towards sustainability. Moreover, brands that adopt innovative packaging solutions, such as using recycled materials, not only enhance their appeal but also build customer loyalty. Approx. 92% of Indian shoppers consider sustainability important when choosing brands.
Government Initiatives and Policy Support
The Indian government’s forward-looking policies are creating a favourable landscape for the FMCG sector. Allowing 51% FDI in multi-brand retail and 100% in food processing is set to stimulate new product launches, increase employment, and enhance supply chains. The Production-Linked Incentive (PLI) scheme, backed by an investment of US$ 1.42 billion, offers a significant opportunity for businesses to scale up exports.
Furthermore, initiatives like the Pradhan Mantri Awas Yojana (PMAY) and the development of rural infrastructure are improving accessibility, allowing FMCG companies to better reach rural markets. The Open Network for Digital Commerce (ONDC) is also expanding digital commerce across India, further supporting the sector’s growth by enhancing domestic manufacturing and attracting foreign investments.
Challenges and Future Outlook
The sector is currently grappling with significant challenges, including supply chain disruptions heightened by the COVID-19 pandemic, increased competition from rapidly growing direct-to-consumer (D2C) brands, and the expansion of private labels. To remain competitive, FMCG companies must leverage technology-driven solutions to enhance supply chain resilience and manage large volumes of data efficiently. Additionally, they must adapt to evolving consumer trends, such as the shift towards online shopping and the changing demands of an aging population. As brands adapt to these dynamics, implementing sustainable practices will be essential for appealing to environmentally conscious consumers and ensuring long-term viability.
With the world’s largest population, a rapidly expanding middle class, and rising disposable incomes, the FMCG industry is set for significant growth. While challenges like supply chain disruptions and intensified competition exist, the sector’s ability to adapt and innovate positions it well for a bright future. The ongoing demand for new products and evolving consumer preferences are likely to drive further expansion, making the sector an exciting space with strong potential.
