When Inflation levels drop FMCG markets Peak OutWhen Inflation levels drop FMCG markets Peak Out.
Inflation significantly impacts the Indian Fast-Moving Consumer Goods (FMCG) market in several ways:
Increased Input Costs: Inflation drives up the prices of raw materials like oils, grains, and packaging materials. For instance, the wholesale price index for oils and fats increased by 13% in a recent quarter1.
Price Hikes: To cope with rising input costs, FMCG companies often increase the prices of their products. This can lead to reduced consumer demand as people become more price-sensitive2.
Shrinkflation: Some companies resort to “shrinkflation,” where they reduce the quantity of the product while maintaining the same price. This tactic helps manage costs without overtly raising prices2.
Reduced Consumption: High inflation can squeeze consumers’ disposable income, leading to a decrease in the consumption of non-essential FMCG products. This was evident when FMCG sales volumes fell by 1.1% in a recent quarter3.
Profit Margins: Despite the challenges, some FMCG companies have managed to maintain or even increase their profit margins by optimizing costs and improving operational efficiencies1.
Overall, while inflation poses challenges, the FMCG sector continues to adapt through various strategies to sustain growth and profitability.
