FMCG Majors Feel Margin Pressure Amid Rising Threat from Regional Brands
Large FMCG companies are facing mounting pressure on margins as regional and local brands carve out market share by offering competitively priced alternatives, according to a recent Credit Suisse report. This intensifying competition is shifting pricing dynamics and prompting strategic shifts from industry leaders.
The report highlights that mass consumer-facing categories, including soaps, detergents, and food products, are particularly vulnerable. While rural demand is recovering, it’s increasingly being captured by smaller, regional players who are gaining consumer trust through perceived value and localized strategies.
“With consumption recovery underway, especially in rural areas, regional players are regaining lost ground,” the report states. “These brands are not just penetrating deeper into rural markets but also posing pricing challenges in urban areas.”
FMCG giants are increasingly reluctant to raise prices in response to inflation, partly due to competitive pricing by regional brands that limits pricing power. This has led major players to shift focus toward premiumisation and value-added SKUs to protect brand equity and improve profitability.
Distributors and retailers echo these findings, noting a visible rise in local product availability and demand, particularly in price-sensitive segments. Many retailers report shifting shelf space to accommodate popular regional brands, reflecting evolving consumer preferences.
Notable regional players have capitalized on these trends by adopting agile manufacturing, localized campaigns, and leaner distribution models. This allows for faster go-to-market strategies and cost efficiencies, enabling price points that national brands struggle to match without impacting margins.
Despite macroeconomic tailwinds such as declining inflation and stabilizing commodity costs, major FMCG players are expected to navigate a tougher operating environment through FY25. Strategic investments in innovation, brand differentiation, and distribution efficiency will be crucial to counter regional competition and protect volumes and profitability.
The intensifying rivalry underscores a critical shift in India’s FMCG market—one where legacy brand strength alone is no longer sufficient. Companies must now balance scale with agility and innovation to stay competitive in a fragmented and increasingly price-conscious market.