The FMCG Umbrella Is Expanding Fast, Courtesy Newer Premium Products

Over time, the detergent market evolved—introducing detergent bars, followed by liquid detergents tailored for top-load and front-load washing machines, which eventually made way for premium products like fabric conditioners and, most recently, detergent pods. These pods combine detergent, conditioner, stain remover, and fabric stiffener into a single squishy pod.   

This transformation in the detergent aisle reflects the larger, linear and exponential growth in the Fast Moving Consumer Goods sector, which continues to grow as manufacturers roll out premium, innovative products in response to changing consumer trends.

"The evolution of FMCG sector has always been about upgrading the consumer to newer and premium products," said Preeyam Tolia, an FMCG analyst from Axis Securities Ltd. 

For the company, selling more premium products ultimately leads to margin expansion, he said. If the company is selling more of a liquid detergent, it's more profitable than the powder. At the same time, raw material for manufacturing the liquid is cheaper compared to powder as it contains water as a main filler, Tolia added.

In 2024 alone, top FMCG companies have introduced a variety of products:

1. Nestle India Ltd. launched Nespresso, a premium coffee machine and coffee line, along with an Espresso Concentrate aimed at tapping into the growing trend of iced coffees. 

2. Honasa Consumer Ltd. launched its cosmetic line called Staze and forayed into the personal wash market with its new Mamaearth moisturising lotion soap range. 

3. Adani Wilmar Ltd. added its first-pressed mustard oil Pehli Dhaar to its edible oil range.  

4. Marico Ltd.'s Saffola added three variants of muesli cereal to its breakfast portfolio.

5. Tilaknagar Industries Ltd. launched a green apple-flavoured brandy.

6. ITC Ltd.'s Aashirvad introduced a new Himalayan pink salt with "no added colours". It also added three new Korean flavours to Bingo!, catering to the Korean food craze. 

7. Magnum, owned by Hindustan Unilever Ltd., introduced a new line of mood-inspired ice cream flavours.  

8. Britannia Industries Ltd. re-introduced its classic Bourbon biscuit with a twist, launching a Bourbon thick shake in collaboration with its milkshake line Winkin’ Cow.

Over the years, there have been numerous strategies that fuelled the early growth of FMCG retail chains which also contributed to their eventual downfall, offering valuable lessons for the consumer goods sector. 

This wave of innovation has reshaped India’s retail sector, paving the way for multi-format retailing. As consumers explore new ways to purchase their essential needs, modern retail formats, e-commerce platforms like Blinkit and Zepto, and collaborative launches now dominate the market.

One of the earliest examples of retail transformation is Marginfree Market, which started in 1994 in Kerala. This chain offered products with zero margins, aiming to uplift small-scale shop owners as larger players began to dominate.

Similarly, Subhiksha Stores, which opened in Chennai in 1997, expanded rapidly by selling products at a much lower margin than its competitors. It had about 2,000 stores before shutting down in 2009. The store’s rapid expansion strategy, while initially successful, eventually led to a cash crunch.

The chain even attempted to open one store for every kilometre in Delhi, but defaulted on vendor payments. The owner, R Subramanian, is currently facing 20 years in jail after failing to repay its promoter group Wipro Ltd.

Another early entrant, RP-Sanjiv Goenka Group’s Spencer's Retail, was one of the first multi-format retail players in the consumer goods sector. Despite initial success, the company has had to close several stores over the years, with 49 stores in Hyderabad closing as recently as August. 

A Spencer's executive attributed this to the rise of quick commerce, online grocery stores, and the growing competition from local supermarkets to BusinessLine. 

The strategies that fuelled the early growth of these chains also contributed to their downfall, offering valuable lessons for the consumer goods sector.

Avenue Supermart Ltd. and Reliance Retail Ltd. have now emerged as the largest players in the space, redefining consumer shopping experiences.  

Avenue Supermart, the parent company of D-Mart, reported a gross revenue of Rs 49,533 crore in fiscal 2024. The company’s market capitalisation is 1.3 times larger than that of Trent and 46 times bigger than V-Mart Retail Ltd.  

Reliance Retail, while not listed as a separate entity, reported a gross revenue of Rs 3,06,848 crore in fiscal 2024. The company opened 1,840 new stores during this period, bringing its total store count to 18,836.

There are three channels through which FMCG products can reach consumers—General Trade, Modern Trade and E-commerce.

GT is a traditional retail model where products are sold through small, independently-owned shops and local markets, typically serving nearby communities. Whereas modern trade involves larger, organised retail outlets like supermarkets and hypermarkets, with advanced supply chains and standardised operations.

Quick commerce is the rapidly growing arm of e-commerce. Platforms like Blinkit, Zepto, Amazon Fresh, Swiggy Instamart, and Big Basket have changed the market by offering consumers the convenience of doorstep delivery.

Premium product sales are driven by modern trade and e-commerce. If a product is successful in these two channels, companies will expand it to general trade, said Tolia.

"Dabur has said that 30–35% of their e-commerce sales comes from quick commerce channels," he said.

"So e-commerce, led by the quick commerce is another emerging channel and companies are now doubling their investment in quick commerce. The reason for this is because q-comm increased the visibility of this product to consumers. This compounded with the instant delivery factors is driving the growth," said Tolia.

Zomato’s quick commerce arm, Blinkit, contributed 17% to the company’s Rs 13,545-crore revenue for FY2024. Bernstein expects Blinkit to grow at over 40% year-on-year. 

Motilal Oswal Institutional Equities' Gautam Duggad told NDTV Profit that Blinkit has defied expectations and has been a key driver behind Zomato’s success.

The drawback, Tolia notes, is that quick commerce is yet to break into smaller tier towns, but on the other hand, modern trade is penetrating in those towns. If you look at smaller towns, modern trade is getting traction because customers visiting MT outlets are a family occasion.

According to the IBEF report, India’s e-commerce industry is expected to cross the $350-billion mark by 2030, growing at a CAGR of 23%. By 2024, the sector is expected to reach $53.08 billion, with an annual growth rate of 11.45%, and then accelerate to $91.24 billion by 2029.

The timeline and pattern of Indian consumer expenditure have evolved significantly, shaped by product additions and the availability of multi-format options for purchase. These range from local vendors to hypermarkets and the increasingly dominant e-commerce platforms.