Industry experts are optimistic that the current trend of low inflation, rural revival, and packaged food demand will continue into 2023. The FMCG segment expects inflation to deplete in 2023, with green shoots in the impacted rural segment.
More digitization, premiumization, and demand for packaged and ready-to-cook food are evolving as key drivers of growth as the industry enters the New Year.
Right through 2022, even as the customer became more economical, price-conscious, and always looking for value for money, one of the ways in which FMCG businesses adapted was by reducing the weight 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.
Mentioning positive growth in premium segments, Saugata Gupta, MD and CEO of Saffola edible oil maker Marico, 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.
“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).
Sunil D’Souza, MD and CEO, Tata Consumer Products, said that brands that stay pertinent 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.
According to Ashish Khandelwal, MD, BL AGRO, “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.” He also added 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 fulfil the demand.
Gupta from Marico remarked, “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. He did, however, add that the company is ready to weather any upward trends and volatility by leveraging its scale and volumes.
Also, next year, loyalty in the D2C space will be tested as brands reduce discounts in an effort to improve the bottom line because online customer trends are fickle, jumping marketplaces or picking the lowest common denominator.
Premiumization and the packaged and ready-to-eat segment will drive growth
According to Manish Bandlish, MD of Mother Dairy, Fruit, & Vegetable, the FMCG market is likely to maintain the same momentum in 2023 as it did in 2022 due to increased demand for packaged products. He added that the increasing shift from unorganized to organized segments, coupled with digitization, is going to be a significant driving force in the growth of the FMCG sector in 2023.
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 percent EBITDA margin in FY23. “We have been driving growth through digitization and premiumization. In line with this, we expect our digital portfolio to keep growing every quarter till it reaches Rs. 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, and dry fruits; NourishCo, which plays in the water and ready-to-drink segment; Tata Soulfull and Tata Sampann Yumside, which include breakfast cereals, RTE, and snacks; and Tata Simply Better in the plant-based meat category.
“We believe convenience food and RTE/RTC food categories will see a positive uplift and grow faster as post-covid trends continue to factor in and more offices and educational institutes open,” commented Akshay Modi, MD. Modi added that improving macroeconomic scenarios will lead to employment creation and thereby improve consumption trends. He highlighted that the company plans to launch new product categories in the RTE and RTC spaces targeting young urban audiences with high disposable income.