India’s consumer sector set for heightened growth through targeted policy interventions: Deloitte-FICCI report

• New Indian consumers are making value-based choices of convenient, sustainable, healthy and locally manufactured products
• Changing consumer preferences demand greater emphasis on innovation and digital adoption

National, 7 October 2024: Deloitte, in collaboration with FICCI, unveiled the “SPURring growth in FMCG, retail and e-commerce sectors in India” report at the FICCI Massmerize event today. The report highlights the pivotal role of India’s consumer Industry in boosting the overall economy.

The Indian economy demonstrated remarkable strength, with its real GDP expanding by 6.7 percent in Q1 FY25 despite global economic headwinds. The IMF upgraded India’s FY25 GDP growth forecast to 7 percent, citing the economy’s bright outlook and strong domestic demand. This growth is underpinned by robust domestic demand, improving rural consumption and a thriving services sector. Trends such as premiumisation, sustainability, health consciousness and convenience, riding on the digital wave, have brought disruptive models of quick commerce in the retail, FMCG, and e-commerce sectors, driving significant transformation.

Amid growing optimism, the report highlights the need to decode a new retail code focusing on targeted reforms and policy changes to support innovation, improve infrastructure, update laws and ensure equitable development across urban and rural regions.

In addition, India’s FMCG, e-commerce and retail sectors are increasingly relying on strategic M&As to drive long-term growth and competitiveness. The report reveals that consumers are shifting towards premium, sustainable and personalised products, prompting companies to innovate and upgrade their portfolios to meet these evolving needs. This surge in consumer demand, combined with a growing focus on sustainability, health and digital adoption, has created fertile ground for increased M&A activity.

Anand Ramanathan, Partner, Consumer Products and Retail Sector Leader, Deloitte India, said, “The consumer industry is a driving force behind India’s economic resilience, with the FMCG, retail and e-commerce sectors serving as its pillars. However, to maintain this trajectory, a strategic partnership between the government and the private sector is essential. We need reforms that directly address inflation control, credit access, and the ease of doing business. Policies that incentivise R&D, promote health and enhance rural infrastructure will be game changers.

With the right policy framework in place, India is well on its way to becoming the world’s third-largest consumer market by 2030, transforming the economy and livelihoods of millions of people.

Steps such as establishing a dedicated consumer sector council to focus on innovation, digital transformation and supply chain efficiency could propel us towards achieving the US$2 trillion consumer market milestone and ensure that we become the third-largest consumer market by 2030. The government’s role in shaping the future of this industry through enabling fiscal and monetary policies to support private investment and consumption will be crucial for achieving these objectives.”

Harsha V Agarwal, Senior Vice President, FICCI; Vice Chairman and Managing Director, Emami Limited, said, “The Indian consumer sector is poised for transformative growth, fuelled by rapid innovation, digital adoption and shifting consumer preferences. This promising trajectory offers immense opportunities for the FMCG and retail sectors to expand and evolve. To harness this potential, collaboration between the government and businesses will play a pivotal role. By aligning policies with emerging market trends and nurturing an ecosystem of innovation and sustainability, the Indian consumer sector can serve as a vital partner in driving India’s economic prosperity and shaping a bright future for all stakeholders.”

Six key consumer demand trends

• Quick commerce surge: Driven by urbanisation and rising consumer expectations, the quick commerce market is projected to grow significantly, focusing on faster deliveries and localised e-commerce strategies, especially in non-metro cities. According to the consumer survey, 37 percent of consumers favour quick commerce over traditional e-commerce for food and beverages, as impulse purchases or immediate needs often drive these items. In contrast, home, beauty and personal care products are more planned purchases, making e-commerce the preferred option in these categories.

• Affluent vs unaffluent divergence: A noticeable shift in consumer behaviour is evident between the affluent and unaffluent segments, indicating a clear trend emerging across multiple consumer goods sectors. In the FMCG sector, affluent consumers increasingly opt for larger pack sizes, indicating an uptick in spending capacity, while unaffluent consumers are downtrading. This broader pattern of upgrading is evident in affluent markets, where higher disposable incomes drive a preference for premium goods that offer more value. In contrast, unaffluent households are pulling back on expenditure, choosing unbranded or more affordable products.

• Rising demand for healthy food choices

• Demand for healthy snacking: Consumers are looking for foods with added health benefits, such as fortified cereals, probiotics and protein-rich snacks. About 78 percent of consumers are willing to pay a premium for healthy food and beverages.

• Shift towards natural and less processed options: Indian consumers are increasingly aware of the health risks of ultra-processed foods, including links to obesity, diabetes and heart disease. This has led to a decline in the consumption of highly processed snacks and a rise in demand for natural and minimally processed alternatives.

• Rising demand for regional flavours: The diversity of India’s regional cuisines is increasingly reflected in the packaged food sector. Gujarati snacks, South Indireviean spice mixes and Bengali sweets are gaining popularity nationwide. This shift indicates a growing consumer interest in authentic, region-specific flavours, driving demand for packaged foods that offer a taste of local cuisines, indicating consumers are returning to their roots and preferring local manufacturing.

• Sustainability: Consumers demand sustainable products and are ready to pay a premium, prompting companies to innovate around eco-friendly packaging, ethically sourced products and personalised offerings. There is also a growing demand for sustainable food options, with consumers willing to support brands that engage in eco-friendly practices such as sustainable sourcing, minimal packaging and ethical labour practices.

• Clean label: Consumers are increasingly demanding products with minimal and recognisable ingredients. The clean label trend is pushing brands to reformulate products to remove artificial additives and preservatives. For instance, in beauty and personal care, 51 percent of consumers are willing to pay a premium for natural ingredients. The clean-label ingredients market posted a CAGR of 20.7 percent between 2018 and 2022 and is expected to continue growing. Driven by the growing demand, 5,000 clean-label products were launched in India in 2023, accounting for 13 percent of the global product launches.

• Expansion of private label brands: Indian retailers are increasingly launching their own private label products, typically priced 25–40 percent lower than comparable branded items. This shift is driven by the desire to offer cost-effective alternatives that appeal to price-sensitive consumers. In India, private labels represent 4 percent of total retail sales, of which 70 percent are of food categories.

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This press release has been issued by Deloitte Touche Tohmatsu India LLP.
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