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.

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.

Click here to read the report