Regional players test FMCG giants

he above chart visually compares the growth rates of the overall FMCG market, large FMCG companies, and small FMCG firms between 2023 and 2024. Here's a quick interpretation:

• Overall FMCG growth fell from 6.3% in 2023 to 4.8% in 2024, indicating a consumption slowdown.

• Large FMCG players experienced a sharper drop, from 6.5% to 4.4%, impacted by rising input costs and a shift in consumer preferences.

• Small FMCG firms, though also facing a dip, still outperformed the giants, growing from 6.2% to 5.0% year-over-year.

📊 Source: Kantar and CRISIL industry reports, 2023–2024.

ndia’s FMCG Landscape Is Shifting—And Smaller Players Are Reshaping the Rules

India’s fast-moving consumer goods (FMCG) sector is witnessing a silent yet significant transformation. The dominance of established FMCG conglomerates is increasingly being challenged by smaller regional players and direct-to-consumer (D2C) brands. These emerging entities are reshaping consumption dynamics across urban and semi-urban India, offering a clear signal that market leadership is no longer guaranteed by scale alone.

Recent data from Kantar reveals that large FMCG firms—despite holding approximately 34% of the urban market—recorded only 2–3% volume growth over the past year. In contrast, smaller brands, which collectively command two-thirds of the market, registered growth rates in the range of 5–7%. What makes this even more noteworthy is the context: this trend is unfolding in the backdrop of a broader consumption slowdown and rising inflationary pressures. Even within premium product segments, D2C players are increasingly capturing consumer attention, offering alternatives that are competitive not just on pricing but on perceived value and differentiation.

Multiple factors are contributing to this shift. Rising input costs and wage stagnation have resulted in urban consumers reassessing their spending. With discretionary incomes under pressure, households are trading down—not necessarily compromising on quality, but actively seeking value. Smaller brands, many of which operate with localized manufacturing and agile distribution models, are better equipped to deliver competitive pricing. Unlike larger firms, they are less burdened by multi-tiered supply chains and high advertising costs. Consequently, they are able to pass on savings to consumers, who are becoming more cost-conscious without lowering their expectations around product quality.

This shift is not confined to the mass-market segment. Premium niche brands, particularly those adopting a digital-first distribution approach, are also making headway. Brands such as QUITT MOZZ, for instance, are redefining traditional product categories by offering skin-safe, environmentally conscious alternatives to conventional pest control solutions. Such innovations reflect a growing consumer appetite for differentiated, responsible products—something that legacy brands, with their scale-focused R&D cycles and rigid cost structures, often struggle to match.

From a macroeconomic standpoint, India’s FMCG sector remains a vital pillar of the economy. It is the fourth largest sector by value, contributing significantly to employment with over 3 million people engaged directly. While urban markets account for nearly 60% of sectoral revenues, rural India is now driving incremental growth. Small towns and villages are rapidly increasing their FMCG consumption, with many regional brands leveraging this expansion to deepen their market presence beyond state boundaries.

According to CRISIL, the FMCG sector is projected to grow by 7–9% in FY2025, buoyed by a rebound in rural demand and seasonal categories such as beverages during the summer months. However, even with this projected uptick, large firms are under pressure. Their growth decelerated from 6.5% in 2023 to 4.4% in 2024, while smaller players, though also experiencing some moderation, continue to outpace them with 5.0% growth.

This evolving competitive landscape offers valuable lessons. First, consumer loyalty is becoming increasingly fluid. Brand preferences are being shaped less by historical reputation and more by relevance, value, and experience. Second, lean operational models and digitally integrated go-to-market strategies are no longer optional; they are critical for competitiveness. Third, innovation today is less about breakthrough science and more about contextual adaptation—products that resonate with regional preferences, lifestyle shifts, and environmental consciousness.

The pertinent question, therefore, is whether this is a short-term response to economic headwinds or the onset of a longer-term structural change in the Indian FMCG market. The sustained growth of regional and D2C brands across categories such as snacks, beverages, tea, household cleaning, and personal care suggests the latter. These players are not merely filling gaps left by the larger firms—they are, in many cases, setting new benchmarks in pricing, agility, and consumer engagement.

For established FMCG companies, the way forward may lie in decentralizing decision-making, investing in regional product development, and embracing omnichannel distribution models with genuine agility. Collaborations with local manufacturers, acquisition of high-performing D2C brands, and sharper segmentation strategies could offer viable paths to retain relevance.

In summary, the Indian FMCG market is undergoing a significant recalibration. Regional and smaller brands are no longer confined to niche status—they are scaling, innovating, and gaining consumer trust at a pace that demands strategic rethinking from the giants. As consumer priorities evolve, the agility to respond will matter more than legacy strength.