'Small' pains: Inflation squeeze likely to choke FMCG volume growth again

Mumbai: India's fast-moving consumer goods (FMCG) companies could face renewed volume pressure as inflation pushes shoppers towards smaller packs, cheaper products and away from premium goods, with historical data suggesting a repeat of the 2022-24 consumption squeeze, Worldpanel by Numerator (Kantar) analysis showed.

India's retail inflation rose to 5.54% year-on-year in September, the highest since the revised Consumer Price Index (CPI) series was introduced in January. During the previous inflation cycle, average FMCG pack sizes fell 11% from 188 grams to 167 grams between the March 2022 quarter and the December 2024 quarter. Consumers also shifted toward unbranded products, particularly in urban markets. Volume growth in such goods outpaced branded ones during the initial inflation shock. Premium volume growth fell from 29.4% in the first quarter of 2023 to 13.6% in the fourth quarter of 2025, according to the report shared exclusively with ET.

"Prolonged inflation typically impacts demand," said Mayank Shah, vice president at Parle Products, the country's biggest food company. "Consumers initially cut back on spending but gradually return to buying, particularly in food and other essential categories. However, commodity prices remain highly volatile, making it difficult for companies to plan price revisions, at least until Diwali."


Also Read: India's retail inflation quickens to 5.54% in September from 4.83% in August, hits near two-year high

Rural consumption remains stable

In September last year, companies cut prices following a reduction in goods and services tax rates. But renewed inflation in agricultural commodities and crude-linked inputs has prompted fresh price increases, with more likely in the coming months. Companies increased prices by 4-14% for soaps, shampoos and toothpaste over the past six months, although those of products in several categories remained below pre-GST-rationalisation levels.

Manoj Menon, director of the commercial division at Worldpanel by Numerator, said urban consumers tend to cut back more sharply when inflation first rises, while rural consumption remains relatively stable because households depend more heavily on essential goods and have less room to reduce purchases. "As inflation persists, urban consumers gradually adapt to higher prices by adjusting pack sizes, shopping frequency and product choices," he said.

The average number of packs bought per shopping trip rose from 4.9 to 5.4 between 2022 and 2024, according to Worldpanel, suggesting consumers continued buying but opted for smaller packs and spread purchases across time.