Value Growth Hit in ’23, Volumes fill Consumer Baskets

FMCG Sector Trends: Impact on Companies and Investors

Source: Original reporting by ET Bureau, published on January 15, 2024.

Analysis for Layman

The fast-moving consumer goods (FMCG) sector witnessed stagnant sales in 2022 in terms of value, but volume growth picked up in recent months following price cuts by companies. Categories like personal care, beverages, and edible oils experienced 12-15% price reductions after multiple hikes in 2021-22 to counter input inflation.

This strategy led to a revival in demand and volumes, especially around the festive season and winter months. However, the value growth lagged as lower prices offset the gains in volume. Erratic monsoons also impacted rural consumer sentiment, affecting mass categories like biscuits and snacks, where regional brands were gaining market share.

Urban demand for discretionary categories like smartphones and appliances remained subdued, although premium products saw better traction. The outlook for 2023 appears positive with expected improvements in crops and increased government spending pre-elections, indicating early signs of rural recovery and a pickup in post-price cut volumes.

Value Growth Hit in ’23, Volumes fill Consumer Baskets

Impact on Retail Investors

For retail investors, the revival in volume-led demand in essential categories towards the end of 2022 is encouraging. Stocks of major FMCG companies like HUL, Dabur, and Britannia, which experienced corrections in 2022 due to rural weakness, now present reasonable valuations for long-term investors to consider.

These defensive sector stocks may rebound if the forecast of urban stabilization combines with rural tailwinds in 2023. However, caution is advised for high exposure to mass segments until firm signs of rural turnaround emerge by mid-2023. Stocks of discretionary consumer durables firms like Amber, Dixon, and Havells may face additional upside risks due to lingering consumer slackness.

Retail investors should also explore fast-growing smaller FMCG players tapping into niche segments like ethnic foods, regional cuisine, and health supplements. Their innovation-led models are gaining market share from large caps in a challenging environment, presenting high potential in an upcycle.

Impact on Industries

Key industries impacted by consumer sector trends in 2022 include:

FMCG: While sales in 2022 were muted, early signals in 2023 are encouraging per company commentaries. The return of volume growth is a significant positive for major players like HUL and Dabur, as well as challenger brands.

Consumer Appliances: Discretionary durables are still facing demand pressures, except for premium category products. Recovery is expected only by mid-2023 unless the summer of 2023 is harsh.

Telecom: Lower smartphone sales volumes have impacted telcos’ ability to convert 2G subscribers to 4G. The lag effect of weaker additions may affect future data consumption.

Agriculture & Retail: Two consecutive below-par monsoon seasons have softened rural consumption. Direct farm income support schemes by the government may be expanded pre-elections to revive demand.

E-commerce: Online FMCG growth slowed in 2022 but may accelerate as penetrations remain low. Digital access is key for smaller consumer brands enhancing reach.

In summary, a demand revival seems likely from mid-2023 if inflation declines further. Stocks exposed to mass consumption warrant attention upon initial signs of rural recovery.

Long Term Benefits & Negatives

The longer-term outlook for India’s consumption economy, despite recent sluggishness, seems robust:


  • Low current penetration of most consumer products indicates massive headroom for a durable upcycle over the next decade.
  • Rising middle class and working-age population will sustain urban demand tailwinds.
  • Success of smaller, nimble brands with differentiated products expands consumer choice and keeps established players competitive.


  • Income growth lagging consumption aspirations can make lower-income groups vulnerable to transient inflationary stresses.
  • Erratic weather impacting farming incomes emerges as a recurring challenge – policy response to de-risk is imperative.
  • Retaining cost competitiveness for India manufactured goods even as wages and raw material costs rise.

However, with appropriate counter-cyclical fiscal stimulus when required, India’s demographics and societal outlook support a long runway for mass consumption. Investors should utilize short-term demand softness to accumulate quality names across the consumer universe.

Short Term Benefits & Negatives

In the next 6-12 months, potential positive and negative effects of current trends in the consumer sector are:


  • Moderating inflation eases pressure on purchasing power and may sustain the recent uptick in volumes.
  • Pre-election budget likely to spur rural spending to accelerate recovery hopes.
  • Essential categories to benefit from low penetration and relative pricing gap with unbranded players reduced.


  • Uneven monsoons remain a risk for consecutive years – could amplify rural distress in case of a repeat.
  • Delayed comeback in discretionary category spends to weigh on durables, phone demand outlook.
  • If crop cycle recovery is slower than expected, stimulus effect also weakens, posing a risk to consumption turnaround by late 2023.

For investors, the next 1-2 quarterly results will indicate which segments show traction. Selective buying is advised with a focus on rural-linked stocks showing early volume improvement signals. Avoid high discretionary exposure, still volatility persists despite budget stimulus attempts.

Companies Impacted by Indian Consumer Trends in 2023

Indian Companies:


  • Volume-focused FMCG Players: Companies like Parle Products (NSE: PARLE), Dabur India (NSE: DABUR), Marico Ltd. (NSE: MARICO), and Godrej Consumer Products (NSE: GCPL) could benefit from the shift towards volume-driven growth. Strong rural recovery and improved affordability post-April due to better crop yields and potential election spending are expected to boost their sales.
  • Regional Brands: Regional players in snacks and biscuits like Bikaji Foods (Not publicly traded) and Priya Gold Biscuits (Not publicly traded) could see higher demand as consumers opt for cheaper alternatives in rural areas. Their focus on expanding distribution and new geographies could further contribute to their growth.
  • D2C and Premium FMCG Brands: D2C brands like Mamaearth (Not publicly traded) and Nykaa (NSE: NYKAA) catering to premium, niche segments could maintain their growth momentum as consumers with higher disposable income continue to prioritize these products.


  • Discretionary Product Companies: Companies like Havells India (NSE: HAVELLS) and Crompton Greaves Consumer Electrics (NSE: CROMPTON) might face continued pressure in the smartphone, refrigerator, and television segments due to weak overall demand and price sensitivity. This could potentially impact their revenue and profitability.
  • Rural-focused Companies: Companies with significant exposure to rural markets, like HUL (NSE: HUL) and ITC Ltd. (NSE: ITC), might face slower growth compared to the overall market until rural sentiment fully recovers.
  • High-priced Consumer Goods Companies: Companies selling expensive appliances and electronics like Whirlpool India (NSE: WHIRLPOOL) and Titan Company (NSE: TITAN) could experience slow growth due to limited demand from consumers focused on essential and value-driven purchases.

Global Companies:


  • Luxury Brands: International luxury brands like LVMH (EPA: LVMH) and Kering (EPA: KER) might benefit from continued spending by high-income consumers in India.
  • Global Smartphone Manufacturers: Apple (AAPL) and Samsung (KRX: 005930) could see an uptick in demand for their premium 5G smartphones as prices for these devices become more competitive in the Indian market.


  • Global FMCG Giants: Multi-national FMCG giants like Nestle (SWX: NESN) and Procter & Gamble (NYSE: PG) might face competition from both regional players and D2C brands in India, potentially impacting their market share.

Market Sentiment:

The news suggests a mixed economic picture for India, with FMCG and regional brands generally showing signs of recovery, while discretionary and high-priced goods face ongoing challenges. Overall market sentiment will depend on the pace of rural recovery, inflation control, and consumer confidence in the coming months.

Please note: This analysis is based on the information provided and should not be considered financial advice.

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