Mumbai: Looking ahead, consumer caution is likely to persist, with households remaining constrained by stretched budgets — and they don’t see it improving soon. The near future belongs to restraint, not significant revival, according to the FMCG Pulse Q3 2025 Report released by Worldpanel by Numerator.
Muted Growth Continues
The sluggish performance of FMCG continued, with volume growth at just 3.9% in the year ending July 2025. In comparison, the same period last year saw a stronger 5.4% growth.
It has now been five consecutive quarters since the sector recorded volume growth above 5%. While the report anticipates a slightly better performance in Q4 2025, it is unlikely that growth will exceed the 5% mark this year.
The GST Impact
Many manufacturers are moving away from conventional price points toward unconventional packs.
For example, Parle-G Rs. 5 packs will now be sold at Rs. 4.45, with no change in grammage — only the price paid.
The report outlines two levels of potential impact depending on shopper baskets:
- Single or small-category baskets (1–3 categories): The benefit will be marginal. For instance, a Rs. 30 food product now costing Rs. 27 may not trigger additional purchases.
- Main shopping baskets (15+ categories): The benefit could be significant, encouraging shoppers to add more products or quantities over time — once they perceive savings across trips.
Hence, FMCG companies must understand which type of basket their category belongs to. Categories part of larger baskets have higher volume growth potential compared to single-occasion ones.
The report adds that cooling prices and GST 2.0 implementation could offer a mild boost to overall spends, setting the stage for a turnaround as 2025 concludes and stronger growth builds in 2026.
Are Consumers Spending Elsewhere—or Under Strain?
Despite easing inflation and tax concessions, India’s FMCG sector remains subdued. The report asks:
“Are consumers simply spending elsewhere — or is the slowdown symptomatic of broader economic stress?”
Insights from the Kharcha Report, based on over 6,000 households across urban and rural India, shed light on shifting spending patterns and their ripple effects on FMCG demand.
Rising Household Expenses
Over the past three years, average quarterly household expenditure has surged 1.3x to around ₹56,000.
Notably, this rise cuts across income groups, signaling a widespread shift in consumption behaviour.
However, a growing share of consumers now report difficulty managing daily expenses, especially in lower-income segments, suggesting that even modest price hikes disrupt essential spending.
Shifting Expenditures
Groceries and fresh produce continue to dominate household spending, accounting for 40% of total expenses.
While this share is stable, absolute spending has climbed — grocery expenditure alone is up 10%.
Meanwhile, expenditure on education has risen from 4% to 10%, and EMIs and debt from 6% to 10% year-on-year (Q1 2025), indicating rising reliance on credit to sustain household budgets.
Adjusting Priorities
Consumers are prioritizing essential items and making only occasional impulse buys, often opting for cheaper alternatives.
Over 60% say price increases have driven higher expenditures rather than higher consumption.
Still, the Category Importance Score (CIS) for essentials like groceries, electricity, and gas has increased, showing these remain non-negotiable. Discretionary categories have seen slight improvement, signaling early signs of recovery.
Unveiling Opportunities
At its annual Consumer Connections event in August, Worldpanel by Numerator identified three emerging trends that will shape FMCG growth in the years ahead.
1. Tier-2 Cities: The New FMCG Powerhouses
India’s urban middle class accounts for 21% of households — 11% in small towns, 6% in metros, and 4% in tier-2 cities.
Surprisingly, the tier-2 middle class leads in FMCG consumption:
- 231 kg of FMCG annually (vs 196 kg for metro/small city counterparts)
- Average FMCG spend: ₹31,000 (vs ₹30,000 in metros and ₹28,500 in small cities)
Though metro consumers are more premium (₹153/kg vs ₹136/kg in tier-2), higher living costs and diversified spending options limit their FMCG consumption.
Takeaway: Tier-2 cities are no longer behind — marketers must design equal strategies for these markets alongside metros.
2. Beyond Premium: Rise of the “Super-Premium” Segment
The premium FMCG segment contributes 15% of the market (~₹98,000 crore). Within it, a new “super-premium” sub-segment already represents 40% of premium volume, priced 1.5x higher than the category average.
This space includes both global and local players — from Tresemme and Sensodyne to Sikaram Groundnut Oil, which commands 2x the category price yet holds a 26% volume share in Tamil Nadu’s super-premium oils.
These brands leverage “health” and “natural” cues — cold-pressed, fortified, traditional ingredients — signaling that the race for super-premium dominance is underway.
3. Evolving Health Behaviour
The Health & Wellness segment in Food & Beverages is now valued at ₹63,093 crore, growing at a 12% CAGR over four years.
Health has become a mainstream driver of premiumisation, with shoppers willing to pay:
- 22% extra for health products (affluent)
- 17% extra (less affluent)
The trend has shifted from disease-led to preventive consumption — health-conscious purchases are rising even among households with no chronic conditions.
Implication: Every food & beverage brand needs a healthline. Preventive health positioning offers immense headroom — health products currently represent just 17% of F&B value, leaving vast potential for growth.
Conclusion
The FMCG sector stands at a critical inflection point.
While consumer sentiment remains cautious and budgets tight, Tier-2 markets, preventive health trends, and super-premium niches present clear growth pathways.
As Worldpanel by Numerator concludes, the next phase of FMCG growth will belong to those who decode value, health, and aspiration — all at once.
