The FMCG sector is unlikely to experience a complete recovery in urban demand until mid-next year. Despite this, companies focus on premiumisation to drive growth in major cities, where consumers prioritise high-quality products and convenience. This strategy aims to offset the sluggish overall consumption. Premiumisation will boost value growth in 2025; according to Mohit Malhotra, consumers seek to upgrade their lifestyles and prioritise new experiences. This will continue while a few categories may possibly see some trading down due to inflation, Tarun Arora, CEO at Zydus Wellness, which makes products like Complan And Glucon-D, said. In 2025, growth will be led by premium value-up and experiential offerings, according to industry executives.
According to analysts at marketing data and analytics firm Kantar, categories such as liquid beauty products (including body wash and face wash), Western snacks, and instant coffee are making their way into more households, reflecting consumers’ growing interest in premium segments.
High inflation has tightened the budgets of the urban middle class, reducing their spending power. However, a robust monsoon has supported a recovery in rural areas, which continues to show resilience. Fluctuating commodity prices and soaring food inflation have particularly impacted urban discretionary spending. As a result, consumption levels in the quarter ending September this year fell to their lowest in two years, noted Suresh Narayanan, Chairman and MD of Nestlé India.
“While the challenges of rising debt and lower disposable incomes in urban areas persist, we expect a steady recovery starting mid-2025. Consumers are still leaning towards high-quality, health-conscious products, especially in cities. The increased demand for quick commerce is reshaping how we engage with consumers,” Mayank Shah, vice president at Parle Products, said.
Marico’s digital-first and premium brands are demonstrating resilience and growth, according to MD & CEO Saugata Gupta, who anticipates a revival in urban consumption within the next few quarters. For Nestlé, e-commerce achieved impressive double-digit growth in Q2 of 2024-25, marking the strongest performance in the past seven quarters and contributing 8.3% to domestic sales.
However, some industry stakeholders are advocating for policy measures to stimulate mass consumption in urban areas, as rural growth alone may not be sufficient to offset the overall decline in urban demand. A full recovery in urban consumption will take at least six more months. The extent to which rural growth can compensate for urban sluggishness will depend on factors such as easing overall inflation—particularly food—and more favourable economic conditions.
“Without relief from inflation or some demand impetus from govt, achieving significant improvement in mass consumption might be an uphill task,” Arora said. The upcoming budget should consider “proactive measures” to stimulate consumption in the larger economy, said Aasif Malbari, CFO at Godrej Consumer Products.
