New Delhi [India], December 16 (ANI): Fast-moving consumer goods (FMCG) companies in India are witnessing signs of demand recovery, supported by recent GST-linked price cuts and higher promotional activity, according to a report by ICICI Bank.
The report said that based on-the-ground checks and its own assessment, select FMCG categories are seeing an improvement in demand after companies reduced prices following GST cuts. These price reductions have encouraged consumers to buy more, especially in non-essential or discretionary categories.
It stated "FMCG are witnessing demand recovery aided by the recent GST-linked price cuts. Interestingly, price reductions have led to high elasticity (>1) in discretionary categories such as beauty, lotions and shampoos, while staples remain stable with soaps showing early recovery".
The report noted that price elasticity is currently greater than 1 in some discretionary FMCG segments. This means that when prices are reduced, demand increases by more than the price cut. In simple terms, a small reduction in price is leading to a much bigger jump in sales volume in these categories.
The report highlighted that beauty products, body lotions and shampoos have shown the strongest response to price cuts. Consumers are more willing to increase usage or shift to better products when prices come down in these categories. As a result, demand in these segments has picked up faster compared to others.
In contrast, staple categories such as soaps, hair oils and some food items have remained more stable. These products are used regularly, so demand does not change sharply with price cuts. However, soaps are showing early signs of recovery, indicating a gradual improvement even in staple segments.
The report also pointed out that price elasticity is higher in larger pack sizes. Larger packs have seen a sharper rise in demand due to deeper price corrections, especially on e-commerce and quick commerce platforms.
FMCG companies are also increasing the grammage, or quantity, in price-pointed packs. This strategy is helping boost volumes in mass categories like soaps, shampoos, hair oils and biscuits, as consumers feel they are getting more value for the same price.
To drive both consumption and market share, companies are using a mix of price cuts and higher trade promotions, particularly on larger packs. This approach is helping them attract customers and encourage bulk buying.
However, the report cautioned that sustaining this demand momentum will be important for future growth. The report said that heavy discounting and lower effective prices may have led to pantry loading for 4 to 6 months in some categories.
This means consumers may have stocked up on products in advance, which boosts sales in the short term but could reduce demand in later quarters. (ANI)