FMCG Revenue Growth Set for Revival as Urban Demand Strengthens
The fast-moving consumer goods (FMCG) sector in India is poised for a revenue rebound in fiscal year 2025, driven by renewed urban demand and a stable pricing environment. A recent report by CRISIL Ratings predicts mid-single-digit revenue growth for the sector, marking a steady recovery from recent challenges.
Urban Demand Drives Recovery
After a subdued period, urban consumption is regaining momentum, particularly in discretionary categories. The report highlights that consumers in urban centers are increasing their spending, benefiting companies with a strong foothold in premium and discretionary segments such as home and personal care.
In contrast, rural demand remains sluggish. Despite improvements in rural consumption over the last two quarters, it has yet to return to pre-pandemic levels. Persistent inflationary pressures and lower disposable income in rural areas continue to impact purchasing patterns.
Pricing Stability and Volume-Led Growth
Unlike previous years when price hikes contributed significantly to growth, the sector is now witnessing volume-driven expansion. CRISIL notes that price-led growth is likely to remain limited in fiscal 2025, as raw material costs have stabilized, reducing the need for aggressive price increases. This shift favors companies that prioritize volume expansion over pricing strategy.
Profitability Prospects Remain Strong
Despite subdued overall revenue growth, FMCG companies are expected to sustain healthy operating margins. Stable input costs and strategic cost-efficiency measures should help maintain profitability levels close to last year’s figures. This will be crucial for companies looking to invest in marketing, distribution, and new product launches to drive long-term growth.
Outlook for the FMCG Sector
As income levels in urban areas rise and discretionary spending picks up, companies focused on premium offerings are expected to benefit the most. Meanwhile, rural demand recovery remains a key factor that could further strengthen the sector’s performance if economic conditions improve.
FMCG brands with a well-balanced portfolio, effective rural distribution strategies, and strong urban market penetration are likely to navigate the evolving consumer landscape successfully in the coming year.