Big brands on their toes as smaller FMCG companies make a comeback

India's $5 trillion domestic fast-moving consumer goods (FMCG) market is seeing a revival of small brands, according to a report by the Financial Express (FE).

By innovating in terms of product, promotions, and packaging, and keeping prices low, these local brands have grabbed a share of the pie from their larger counterparts. These local brands had a volume growth of 12.7 per cent versus 8.5 per cent for big brands, data from the insights agency Kantar shows.

As inflation has continued to abate in the May-July period, the volume growth number for small brands is at about 15-16 per cent during the period, according to industry estimates. Big brands saw a growth of about 10 per cent in this period. For the twelve months ending April 2023,  the volume share of large brands remained higher at 36 per cent than local brands' 28 per cent.

FE quoted industry experts as saying that in some markets such as Rajasthan, the shift from big to small brands is as high as 75 per cent in the hair oil category. The shift is 65 per cent in detergents in markets such as Uttar Pradesh while it is 49 per cent in spices in states like Karnataka.

Big companies such as Hindustan Unilever (HUL) are taking notice of the trend. As the intensity of competition from small firms had grown, HUL was focusing on volume growth, HUL’s MD & CEO Rohit Jawa said in an earnings call last week.

On HUL’s strategy to take on competition, Jawa said, "At the bottom line, we do have the tailwind of reducing commodity costs. Some of that is being re-invested as higher advertising and promotion (A&P) spends. We want to keep our brand strong.”

To curb market share loss, experts say that big brands need to focus on markets where local brands are growing fast. Sachin Bobade, vice president of research at Mumbai-based brokerage Dolat Capital, was quoted as saying that small players can quickly take advantage in a market where commodity prices are falling. Big brands will have to react at the local level with suitable solutions