Caught between devil and deep sea, FMCG majors are losing both mass and premium consumers

• Top listed players seem to be losing premium customers to global and digital-first brands.
• The market share is leaking to regional and smaller brands in the mass category.
• In the home and personal care segment, unlisted players grew almost thrice as fast as listed players in 2023.
  

It’s been a fairly bland fiscal year for top-listed FMCG majors like – HUL, Marico, Britannia and more who have been awaiting a consumption uptick. But macro factors like inflation are not the only reason for their troubles. Top listed players seem to be losing premium customers to global peers and digital-first brands, apart from mass customers to regional and smaller brands.


At the lower end of the market – small and regional players emerged after commodity prices dropped last year. These brands offered attractive prices to downgrading and downtrading customers. Many customers, especially in hand wash, body wash, shampoos, floor cleaners, and cooking oils, have been downtrading – shifting to brands that offer better prices.

“It appears that listed FMCG companies have also underperformed as competitors from both mass and premium end are outperforming. At the mass end, the resurgence of competition from price-warriors post a correction in input cost prices has led to market share losses,” says a report by ICICI Securities.

Due to a K-shaped recovery, the premium categories are growing at a much faster clip than others. Here too, global unlisted companies, new-age and emerging brands are growing much faster — squeezing the listed players from both ends.

“In premium categories, unlisted MNCs peers having higher salience of premium positioned portfolio and digital-first brands (largely in beauty and personal care categories) are taking away market shares from listed peers at the premium end,” adds ICICI Securities.

Diverse consumer tastes, and high-decibel campaigns by new-age brands are starting to have an effect.

Materially ‘low’ growth in HPC

Listed players’ revenue growth is materially lower than unlisted consumer staples companies, the report says.

As of FY23, the average revenue growth of listed companies like — ITC, HUL, Britannia, Nestle, Tata Consumer, Marico, Dabur etc — was 11%. But the same for unlisted peers like — Kellogg’s, Hershey's, L’Oreal, P&G, and Parle — was around 18%.

The gap in growth between listed and unlisted peers is much wider in home and personal care. While listed companies’ revenue growth is at 8% for HPC, unlisted companies lost almost thrice as fast – at 22%.

“Higher competitive pressure at both mass and premium end has led to underperformance of listed home and personal care, in our opinion,” says ICICI Securities.

In the food and beverage category, however, listed companies performed better. “We believe outperformance of listed F&B companies is distribution driven by higher focus on increasing either direct reach or improving the line selling by Nestle, Britannia, Mrs. Bector’s,” the report says.

In the last few quarters, FMCG players have been correcting their prices and waging a war against regional brands. Many analysts believe that top-listed peers are expected to win the war against their competitors, even as price-led growth has been slowing down.

“We note growth trajectory for listed peers is likely to improve gradually given the competition from price-warriors is likely to reduce with most companies passing the input cost price benefit to consumers. Our channel checks suggest growth of unlisted consumer staples companies has also decelerated in the last couple of quarters,” says ICICI.