Prices of fast-moving consumer goods more than doubled over the decade | Mint
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Business News/ Economy / Prices of fast-moving consumer goods more than doubled over the decade

Prices of fast-moving consumer goods more than doubled over the decade

College fees seeing the maximum price rise followed by kitchen staples, household care products and food and beverages


Prices of packaged household staples, care products as well as packaged foods and beverages have more than doubled since 2012. College fees saw the maximum price increase followed by kitchen staples, household care products and food and beverages, the Boston Consulting Group (BCG) along with industry body CII said in a report.  

The report said that the price increase has led to pressure on volumes of fast-moving consumer goods, or FMCG, as the quantum of price hikes remains firm. 

FMCG volumes reported a compound annual growth rate (CAGR) of 3.4% between 2007 and 2023 and 1.5% in the 12 months ended July 2023, as factors such as the covid-19 pandemic, high inflation and lower emphasis on innovation as well as category development weighed heavily on volume growth.

BCG tracked change in prices of multiple household goods and services over a ten-year period to cover college fees, FMCG including kitchen staples such as rice, pulses, flour, apart from household care products, electricity, fresh produce, fuel, clothing, inter-city travel, large appliances, four wheelers, local transportation, mobile and internet. 

Internet plans, mobile phones, local transportation and new vehicles reported the lowest change in prices over the last decade.

“At a total category level, the FMCG industry has taken greater price hikes compared to other categories where households spend their money. This is likely to be one of the reasons why volume growth has not been as strong.  There has also been greater focus on profitability rather than growth by the large consumer goods companies. If one looks at it from an innovation lens, that has also been less i.e new launches," said  Abheek Singhi, MD and senior partner, chair of practices, BCG. Companies have also prioritized market share gains over developing categories.

Indian households spent 5.4 trillion in 2023 on fast moving consumer goods such as biscuits, soaps, shampoos, toothpaste, jams and floor cleaners, etc. These expenditures have surged nearly 45% since 2019. 

Overall, FMCG volumes have been declining in urban markets across different socio- economic classes categorized as A, B, C, D and E since 2014 as consumers find room to spend on other discretionary categories; while they have grown or remained the same in rural markets between the 2007 and 2023 period, BCG said, citing researcher Kantar’s household panel data.

“If you look at overall household consumption during that period, it has seen a CAGR of about 6.1% (in volumes); while FMCG has seen 3.6% (2007-2023). There are other products which have grown higher than FMCG, so in some sense, FMCG has not got its fair share of that expenditure," he added. 

BCG looked at the CAGR of real household consumption between 2007 and 2023 calendar years.

Affluent households that account for 16% of all households in India spend 32% on fast moving consumer goods, the same household class accounts for 90% of spends on cars, BCG said, citing data for the current calendar year. 

BCG defines affluent households as those that earn over 10,00,000 per annum. These consumers also spend disproportionately more on leisure travel and apparel. Meanwhile, 60% of spends on FMCG come from what BCG defines as “middle income" households or those with annual household incomes of 150,000 to 10,00,000.

Companies will need to fast-pace innovation, launch more affordable products and take price corrections, said Singhi. “Those would be the kind of things that can help spur volume growth," he added. 

Others in the business concurred. Deepak Subramanian, executive director, home care, Hindustan Unilever Ltd, said the industry could push more packs at affordable price points and step up innovation.

“As an industry, the supply side response has probably not been exactly where it needs to be. In our categories, at HUL, a third of the business is locked in price point packs (or low-priced packs). The contribution of that has increased over the years. That is one of the things we should be looking at. Are we doing enough on price pack strategy? I believe innovation and category development can also be taken up to a whole new level," he said, speaking at an industry event in Mumbai on Monday.

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Suneera Tandon
Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
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Published: 11 Dec 2023, 07:43 PM IST
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