FMCG Players Adapt Strategies Amid Inflation Challenges This Festive Season

Despite inflation pressures, FMCG and retail companies adapt by focusing on quick commerce and traditional e-commerce. Inflation impacts sales and margins, but festive demand offers hope. Strategies include optimizing supply chains and expanding to tier 2 and 3 markets to capture demand and ensure sustainability.

As corporate earnings feel the strain and inflation affects consumer spending, FMCG and retail firms are navigating through a challenging festive season. Industry experts highlight that sustained inflation is impacting both sales and profit margins, spanning across both urban and rural areas. Yet, a notable spike in demand coincides with the festive peak.

Manish Aggarwal, Director of Bikano, Bikanervala Food Pvt. Ltd., remarked on the challenges posed by rising commodity inflation, which affects consumer purchasing power. He stated that with the festive period extending from Rakshabandhan to Diwali, demand has surged. The company is prioritizing quick commerce to ensure prompt deliveries, given high consumer demand during the festive season.

The Reserve Bank of India (RBI) recently acknowledged the mixed economic signals in its October bulletin, noting a slowdown in high-frequency indicators but remained optimistic for a potential recovery. Inflation, especially in rural areas, has seen significant increases. However, spending seems to be rising in smaller towns and lower-tier cities, indicating a possible festival-season revival.

Aggarwal stressed that inflationary pressures on raw materials would not compromise consumer access to quality and affordability. Industry voices like Kuldip Raina of Shalimar Paints and Ravi Saxena of Wonderchef echoed these sentiments, noting the considerable impact on sales and margins, influenced by consumer behavior and income levels.

To combat these challenges, many FMCG companies are optimizing supply chains, reducing operational expenses, and adjusting product sizes to sustain price points. Expansion beyond metro areas, particularly in non-food categories, has seen rural consumption growth outpace urban counterparts, according to RBI's Industry Monitoring Group. Rajeev Jain from DS Group expresses optimism, highlighting rising incomes in tier 2 and 3 markets despite inflation challenges.

Overall, even as inflationary pressures prevail, FMCG and retail players are confident that strategic adjustments and deeper penetration into smaller towns can unlock the potential of the festive season.

(With inputs from agencies.)