Small Regional FMCG Players Make A Comeback, Grabbing Shares From Big Companies

Small regional FMCG players, which reemerged in the market after the cooling of inflation, are giving tough competition to big players, impacting their share in their pocket of influence as well as forcing larger rivals to go for a price revision in segments such as soaps, tea, detergent and biscuits.

Several listed FMCG companies, including HUL, Godrej Consumer Products Ltd, Marico, Britannia, and Tata Consumer Products Ltd, in the September quarter earning calls, mentioned the competition from small players, forcing them to go for price revision.

When inflation is high, smaller players just go out of business, because they cannot compete with the cost structures, which are mainly around giving much higher margins, giving bigger discounts, said Britannia Industries Vice Chairman and Managing Director Varun Berry in an investors call.

But once the commodity prices start to come down, they again start to give big discounts and big margins, he added.

"On one side, you have got the larger players who are obviously much stronger brands, but they are losing out to the smaller players because of the price play and the grams in bag, etc. On the other side, you have got these guys who are throwing money in the market, so we do not want to be caught in this logjam. Only if we find a way to balance and make money out of this will we move forward."

Tata Group FMCG arm TCPL also reported a little bit of an upsurge in local regional brands in tea.

"In tea, there are small and regional players. Yes, there is some amount of trading down and there is a higher intensity of small local traders," TCPL Group CFO L Krishnakumar told PTI after the quarter results.

However, he also added, unlike other businesses, small players were always been there in tea because part of tea is unbranded. It is not a new phenomenon for tea, unlike some other category.

"But yes, we are seeing because of people trading down, especially in the rural market, there is an element of aggressiveness by smaller players, but it has not affected us in a material way because our premium segment is growing," he said.

Marico MD & CEO Saugata Gupta said smaller players are active and there is a higher competitive intensity in the market.

"Amidst the current cost scenario, the sector also witnessed much more active participation from smaller local players in select mass categories. However, pricing cuts taken by frontline FMCG companies to pass on value to consumers should aid recovery and volume growth over the next few quarters," he said.

Godrej group firm GCPL, makers of Godrej NO 1 and Cinthol, said soap category local players are coming back. Earlier, it had a lot of local competition nearly two decades ago but has dwindled since then.

"Even for other categories, it has shrunk while they still remain large. So, it is possible that the margin in soaps with these kinds of low prices are affecting volumes. It is certainly not in the large major states; maybe in some parts of Eastern MP, Bihar, Orissa, there is a local player," said GCPL Managing Director Sudhir Sitapati in an investor call.

HUL Chief Executive Officer and Managing Director Rohit Jawa said FMCG market continues to witness heightened competitive intensity.

"We are seeing the resurgence of small and regional players in select categories and price-points, many of whom had vacated the market during the peak of inflation. For instance, when you look at Tea or Detergent bars, smaller players are growing significantly ahead of large players," Jawa told investors.

Nielsen IQ in its latest report for the September quarter said: "Looking at the broader FMCG industry, small manufacturers are experiencing faster growth rates in the Non-Food categories when compared to their Large counterparts while for the Food category, Large players are growing faster in volume than Small players."

The FMCG industry in India had an overall 8.6% volume growth in the September quarter, helped by higher consumption as the inflationary pressure eased, according to the report by data analytics firm.