News & Analysis

FMCG Growth – India to the Fore

Amidst the global recessionary threats, India appears to have taken center stage with most global consumer goods brands

Sometimes the industry perspectives do not add up. And this is one such occasion where the global FMCG majors appear to be gung-ho about growth prospects in India, especially in the wake of the digital revolution that appears round the corner via ONDC. However, this excitement seems to have bypassed the venture capital community, who seem to be splitting hairs. 

We had reported last week about how the VC community believed that only proven models would attract investments, potentially entering into more late-stage deals with higher round sizes. All at a time when the world is looking up for lessons in decentralized digital growth prospects, as envisaged by the Open Network for Digital Commerce. 

Right on cue, the ONDC CEO Thampi Koshy told a gathering of FMCG executives at a CII conclave that anyone with a product or service to sell can make it available in the open network and can access the platform. “ONDC has a set of specifications that will assist sellers in making their catalog visible to buyers,” he added. 

Moreover, published reports indicated that several global FMCG giants such as Nesle, PepsiCo, Coca-Cola, L’Oreal etc. were planning to enhance their investments in India with higher spendings and selective hirings. These were part of their operating plans for 2023 and based on their belief that the country could stave off the global demand headwinds. 


FMCG majors eying India for 2023 and beyond

PepsiCo President Ahmed Elsheikh was quoted by ET as saying that economic growth prospects were huge in India and the company planned to add newer categories and investments as well as enhancing spending incrementally. He went on to add that the company had identified that it was going to be India’s decade. 

Similar stories emerged from Nestle where the Swiss company revealed that India was fast taking on a major focus and said it would be investing to develop in India with a plan to drive penetration and launch new proprietary items. Most FMCG companies believe that India, with its large population, has massive headroom for growth in low-penetration categories. 

In fact, ITC executive director B. Sumanth told the CII meet that a strong supply chain drives the growth for his company and it could be the right prescription for other brands seeking to connect with its end users. In fact, he noted that ONDC would considerably reduce customer acquisition costs through standardizing cataloging, inventory and order management and fulfillment. 


Headwinds elsewhere, headroom for growth in India

The shift in focus on India comes at a time when several global brands such as PepsiCo, Walmart and Amazon in addition to big tech companies such as Google and Facebook have laid off tens of thousands of their workforce in major markets such as the United States and Europe in order to reduce costs and ride out the inflationary wave. 

This isn’t surprising as most global brands have accepted the vast headroom for growth that India offers, both in terms of penetration as well as per capital consumption. The latter for chocolates stands at 140 grams while in the UK it is a whopping 10 kilograms. Of course, one might argue that the villages hardly consume chocolates. 

The ONDC-led technology development is also bringing companies such as, a SaaS-based solution that digitizes small merchants and provides an end-to-end to enterprise level partners that involves adherence to the ONDC protocols and building data analytics that most FMCG companies would need from the hyperlocal levels upward. 

eSamudaay co-founder and CEO Anup Pai believes that data percolating down to the lowest level in small towns and villages would provide better inputs for brands in their quest for enhanced efficiencies in supply chain management. In parallel, the local communities would also get benefited as they can directly approach these brands for better rates. 

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