After a tumultuous 2024, the FMCG industry hopes to gallop ahead in 2025, riding on rising disposable incomes, urbanization, digital penetration, and shifting consumer preferences. Inflation primarily contributed to last year’s slowdown.
Interestingly, a McKinsey report predicts that India is projected to have the third-largest number of high-income households globally by 2030, just behind China and the United States.
Recently, the sector showed signs of a turnaround as demand for consumer goods in the December quarter of 2024 spiked 10.6 per cent in value terms, its best in a year. The recovery was more striking against 5.6 per cent value growth in the July-September period and the sluggish 3.5 per cent in the June quarter.
The sales growth was driven by strong rural demand, as well as higher prices of staples, including edible oil and wheat flour.
Consumption levels in the quarter ending September dipped to their lowest in the last two years with volume growth of 3.9 per cent as volatile commodity prices and surging food inflation squeezed the urban discretionary spending. The festive season brought cheer and the FMCG sector reported a 7.1 per cent year-on-year jump for the December quarter amid “preference shift of consumers towards smaller packs in consumption” due to high food inflation.
Rural consumption rose to 9.9 per cent from 5.7 per cent in the previous quarter, outpacing urban growth of 2.6 per cent, which doubled vis-à-vis Q3 2024, market researcher NielsenIQ India said in its FMCG quarterly snapshot.
CRISIL had forecast 7-9 per cet revenue growth for the FMCG sector in the current FY25, driven by increased volume and rural demand recovery.
While predicting similar growth patterns in the first half of 2025, global research firm Kantar said that urban markets are likely to lead charge in 2025, especially as rural areas lack strong growth drivers.
According to IMARC Group report, the India FMCG market size was valued at USD 245.39 billion in 2024 and is expected to reach USD 1,108.48 Billion by 2033, exhibiting a CAGR of 17.33% from 2025-2033.
Opportunities & Challenges
Rural resurgence, quick commerce channels, and the thriving premium consumers willing to pay extra for health-focused, sustainable and convenient products, are expected to propel the FMCG sector forward in 2025.
According to estimates, consumption among urban consumers with lower incomes dropped by 15 per cent, whereas the premium segment grew by 12 per cent. Companies such as Marico and Nestle reported an impressive e-commerce growth, purely fuelled by their premium and digitally-focused brands.
FMCG companies also anticipate a boost in consumption growth due to income tax reliefs in Budget 2025-26, along with increased rural investments. The growing middle class with substantial disposable income and a huge appetite to spend on the good things of life, contribute to this sanguinity.
According to a McKinsey report, India is projected to have the third-largest number of high-income households globally by 2030, just behind China and the United States.
To double down on this opportunity, FMCG companies should enhance their digital presence and invest in direct-to-consumer (DTC) models while expanding distribution networks in tier-2 and tier-3 cities.
However, a significant challenge staring the sector in the face is the disruption caused by quick commerce platforms like Blinkit, Swiggy Instamart, and Zepto, which offer ultra-fast delivery services and have shifted consumer preferences towards convenience and speed, particularly in urban areas. This has impacted traditional FMCG distributors and kirana stores, leading to a shift in retail dynamics.
According to a RedSeer report, India’s quick commerce market is projected to touch USD 5.5 billion by 2025. These platforms are expected to account for 45 per cent of the online grocery market in the coming years.
There is also a caution in the optimism with the US slapping ‘discounted reciprocal tariffs” of 27 per cent on India as they could have significant implications on your wallet. The new tariffs could increase prices for everyday items, affecting consumers across various sectors.
Apart from these, maintaining a robust salesforce and managing attrition rates have emerged as a major challenge for FMCG companies.
Shortage of Salespersons
Businesses have been fine-tuning their products and distribution expansion strategy to boost sales through general trade, which includes approximately 12 million outlets nationwide. The sector provides employment to around three million people accounting for approximately five per cent of the total factory employment in India.
However, the struggle for recruiting salesmen is real amid difficult sales targets and appealing gig opportunities that offer better flexibility and earnings. A substantial number of younger workers are transitioning from full-time jobs to roles within e-commerce, food delivery, logistics, dark stores and warehousing due to similar salaries and structured work environments. Additionally, extreme weather conditions, high attrition rates and the expansion of the quick-commerce sector have made recruiting for traditional frontline roles increasingly challenging.
Salesmen are vital to the FMCG industry in India, as they are responsible for reaching out to retail stores, replenishing inventory, and generating revenues for the firms.
This comes even as companies are seeking to recruit additional sales personnel and direct distribution positions to penetrate emerging Tier-2 and Tier-3 markets as well as rural areas, anticipating a rebound in demand in the new fiscal year.
High attrition rate also poses a severe challenge to the sector. TeamLease Services, in its 2024 report on the country’s FMCG sector, said that regrettable attrition, involving employees whose exceptional performance resulted in incentive earnings that exceeded the company’s average incentives, accounted for 21 per cent of departures. Non-regrettable attrition, which occurs when employees do not earn any incentives, was 39 per cent.
The report stressed increased focus on hiring, retention, and productivity to seize new opportunities.
This scenario underscores the shifting dynamics in the FMCG industry and the need for firms to rethink their strategies to address the evolving workforce landscape.
The Way Forward
Enhancing incentives and career paths can help check this migration. Monetary benefits, including salary, allowance, and incentives, are the driving force for these workers. The performance-based incentive is an add-on to attract and retain sales talent. To ensure efficiency and progress, companies are developing various incentive parameters, such as ‘perfect store’ and ‘perfect day’.
The other strategies being adopted include digitising operational variables and using technology to improve distribution planning and route optimisation to ensure better sales performance and efficient resource utilisation.
The FMCG companies are also working on enhancing career paths of such workforce to help them rise through the ranks. Innovative learning and development strategies driven by AI are enhancing employee satisfaction by almost 20%, and assisting companies in tackling issues like high attrition, skill gap and low employee engagement prevalent in the industry. Further, a continuous L&D approach would help them thrive amid the evolving consumers’ demands, while staying competitive in a dynamic environment.