FMCG prices doubled in last decade!

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The prices of packaged household items, as well as packaged food items, have more than doubled since 2012. Speaking of common expenses for the average person, the most significant impact has been on the prices of kitchen items, household products, and essential food and beverage items. A report by the Industry Chamber CII and Boston Consulting Group (BCG) reveals that after FMCGs, the highest increase has been in college fees. Fortunately, there has been relatively minimal change in the prices of internet plans, mobile phones and local transportation over the past decade.

BCG has tracked changes in the prices of various household items and services over a period of ten years. This includes items like college fees, rice, lentils, flour, along with household care products, FMCG products electricity, fresh produce, fuel, clothing, and internet services.

According to Abheek Singhi, Chair of Practices at BCG, prices in the FMCG industry have increased the most compared to other categories, leading to weaker volume growth. Large consumer goods companies have focused more on earning profits than on achieving volume growth.

In 2023, people spent ₹5.4 trillion on consumer goods such as biscuits, soap, shampoo, toothpaste, jam, and floor cleaners. These expenditures have increased by approximately 45% since 2019.

Overall, there has been a decline in the sales of FMCG products in urban markets across different socioeconomic segments categorized as A, B, C, D, and E since 2014. Conversely, sales in rural markets between 2007 and 2023 have either increased or remained stable, according to BCG Research and Kantar’s household panel data.

Referring to the annual figures, BCG states that in India, 16% of affluent families spend 32% of their budget on FMCG products, while the lower-income group spends 90% on household items.

According to BCG, families earning more than ₹10,00,000 per year are considered affluent, and they spend on holidays and clothing on a large scale. Families with annual incomes ranging from ₹1,50,000 to ₹10,00,000 fall into the middle-income category. These families spend 60% of their budget on FMCG products.

Singhi suggests that companies need to focus on innovation, launch more efficient products, and improve prices to increase volume growth. He emphasized the importance of measures that can enhance volume growth.