FMCG Price Hikes To Remain Sustainable Amid Inflation Concerns: JPMorgan's Latika Chopra

The price hikes in the fast moving consumer goods sector is expected to remain sustainable amid inflation concerns, according to Latika Chopra, India FMCG Research, JPMorgan.

In recent months, innovation in the FMCG sector has accelerated significantly, with an increasing number of launches catering to the premium consumer segment. "The pace of innovation has stepped up, but more importantly, we are seeing more and more launches in the premium end of the consumer landscape," Chopra said.

This shift indicates a growing focus on quality and value-driven products as consumer preferences evolve, Chopra told NDTV Profit's Executive Editor Sajeet Manghat on the sidelines of JPMorgan India Investor Summit.

A major trend emerging alongside this innovation is the formalisation of several consumer categories. This formalisation is taking place in both staples and discretionary products. "People are preferring brands over non-brands. This is a very material shift that is happening," Chopra said.

Other key factors influencing consumer behavior include the rise in out-of-home consumption and the increased demand for on-the-go, healthier food options.

"As a result, FMCG companies are adopting more agile approaches to meet this changing landscape. Innovation remains critical, especially in developing the right product formats," Chopra shared. "It’s not just about maintaining an online presence but also tailoring products for e-commerce and quick-commerce platforms to ensure sustainable unit economics," she said.

Additionally, companies are investing in building their capabilities, particularly in digital and technological skill sets, as well as improving supply chain agility. These developments are critical for staying competitive in a rapidly evolving market.

Quick commerce has had a disruptive effect on the retail landscape over the past 2-3 years, with a noticeable shift in consumer behaviour.

"Quick commerce has been disrupting the broader retail industry," said Chopra on the question that whether quick commerce is eating into the market share of e-commerce.

"However, this shift should be viewed within the broader retail market, as quick commerce currently accounts for less than 10% of overall sales in India. In major cities, this figure rises to 25-30%," she said. "The organised value retail and quick commerce can coexist, with certain metro areas seeing faster adoption of quick commerce," she said.

Furthermore, FMCG companies are experimenting with a wider range of products on quick-commerce platforms. "We have started to see more beauty and personal care portfolios being provided on these channels," Chopra said.

Initially, the focus was on essential goods, but now discretionary purchases are increasing. However, both FMCG and quick commerce companies are still determining which products make the most economic sense for these channels.

She anticipates moderate price increases in the low to mid-single digits, but notes that the industry is unlikely to experience hyperinflation. The companies are expected to mitigate incremental cost pressures while maintaining stable margins, thanks to their investments in advertising and innovation, which will drive future earnings growth in the sector.