IGI Logo

We attended the CII FMCG summit, which was themed around GST 2.0, with a wider discussion about the upcoming opportunities and challenges in the sector. Overall, the Panel noted that India has a wide and relevant set of opportunities, with need for players to be agile toward consumer needs (R&D crucial) and segment evolution (aligning to trend is vital). GST rate reduction is likely to help improve affordability (value), while product, packaging, communication, and distribution remain key. Insurgency of brands is aligned with diverse consumer needs and easing entry barriers. In our coverage, we continue to prefer players with better execution – GCPL, Marico, Bikaji, Emami.

Accelerating the India consumption story; GST 2.0, an enabler The FMCG industry is well positioned to benefit from the resurgence in consumer demand, supported by an evolving ecosystem of nascent brands that leverage emerging consumer needs and e-commerce channels. As GST reduces compliance costs for organized players and, over time, eases pressure on consumer wallets, it creates a favorable backdrop for consumption growth and strengthens the overall value proposition. Success in this environment requires excellence in product quality, packaging, communication, distribution, and value, with GST cuts further enhancing the perceived value (benefit likely with a lag). At the same time, as traditional players have ceded opportunities to new-age brands, they need to have a sharper focus on faster innovation, technology adoption, and investment in R&D. With distribution, media, and scale advantages being disrupted, and consumers now spending 6–7 hours a day on digital platforms, brands must engage differently and more meaningfully across digital touchpoints.

Cohorts being redefined; addressing consumer needs crucial India’s consumer ecosystem continues to evolve rapidly. Consumer ticket-size for beauty products stands at >USD20, with consumer cohort size at ~250mn, expected to rise to ~400mn over the next 5 years largely driven by the 28-year median age—dominated by Gen Z and millennials. In hair care, ~40% of Indians have curly hair and, while the focus five years ago was largely on hair straightening, brands are now shifting to genuinely addressing diverse hair needs. New-age companies are leading this change by offering more targeted, problem-solving products. Also, people in rural areas have similar awareness and aspirations. Digital payments are enabling access to data on consumer consumption habits—ie which products, frequency of use, etc; for example, Bihar, Uttar Pradesh, Rajasthan, Madhya Pradesh are crucial for FMCG due to their >2x fertility rate.

Valuation seeks growth support; we favor players with execution capability We continue to see the need for growth recovery, which would be crucial for valuations. Companies with better execution will enhance the outlook and support the valuation ask. We continue to prefer our coverage companies with execution capability – Marico, GCPL, Bikaji, Emami. FMCG sector valuations at 51x fwd P/E trade near 10YF avg P/E of 52x.

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354