FMCG biggies take the fight to regional rivals

Large fast-moving consumer goods (FMCG) manufacturers are planning to take on smaller regional players head-on after losing ground to them in the past few quarters. Chief executives of large companies said moderation in commodity and input prices will allow them to reduce their product prices which will help win back business.

As per the latest data by sales tracker NielsenIQ, smaller companies grew between October 2024 and June this year on volume or number of units sold as compared to growth led by pricing of the large and medium companies.

Britannia Industries managing director Varun Berry said the company has created a war chest to spend in specific territories against specific players. "We are going to fight many battles in smaller territories. And we are doing a specific analysis on each one of these competitors. And I think we are in a very good place to be able to do so now with the inflation, deflation cycle sort of behind us and our having been able to mitigate inflation with all the measures, including cost efficiency programmes," he told analysts recently.

Marico has started offering promotional offers and "beneficial pricing" on its value-added hair oil portfolio, especially amla oil. For coconut oil, sold under the Parachute brand, the company expects a recovery in volume growth as prices come down, competing against smaller brands and the unorganised sector, said managing director Saugata Gupta.

India's largest FMCG company, Hindustan Unilever, has reduced prices in categories like detergent bar and powder to take on increased competition, with the price drop aided by a reduction in prices of inputs such as crude oil and soda ash. "So, both put together, the pricing actions have got deployed in the previous quarters," chief financial officer Ritesh Tiwari told analysts this month.

Dabur's baby massage oil Lal Tail got impacted in markets such as Uttar Pradesh and Bihar, with small player AD Oil eating into its market share, which the company said it would now correct. Berry said small manufacturers, driven by entrepreneurs, have entered the market owing to high margins. He said in categories like biscuits, the margins in the industry were 3-4% about 14 years ago, but have now increased to double digits.

"The reality is that the margins are going to be much higher than what they were in the past. And the reality also is that there will be competitors who'll enter this category and remain in this category.," he said. "Obviously, some of them will sustain themselves; a lot of them will not be able to sustain themselves. It's up to us to read their strategy and make sure that we act accordingly to be able to sustain our numbers in those territories."

As per NielsenIQ's latest report for April-June quarter, small manufacturers continued to drive FMCG consumption in the quarter supported by steady volume growth across food, home and personal care categories on a lower base. In contrast, large players saw stable growth. A combination of strong rural demand and easing inflation has enabled small players to outperform overall industry growth, it said.

Sharang Pant, head of FMCG customer success at NielsenIQ, said the rapid rise of small manufacturers outpacing overall industry growth highlights shifting market dynamics and intensifying competition.