As China’s economic recovery struggles to gain momentum, global consumer goods companies are increasingly turning their attention to India, the world's most populous country, as their next big growth frontier. Companies like PepsiCo, Unilever, and Procter & Gamble are now betting on India's expanding economy to fill the growth vacuum left by China’s uneven post-pandemic recovery.
India: A Rising Star in the Global Market
India’s economy is currently expanding at the fastest pace among major emerging markets, providing a fertile ground for growth in the fast-moving consumer goods (FMCG) sector. With a diverse population and a rapidly growing middle class, India offers vast opportunities for companies to introduce new flavors, product variants, and tailored offerings that cater to both urban and rural markets.
Brian Jacobsen, Chief Economist at Annex Wealth Management, highlighted the shift in focus, stating, "While the last decade had companies focused on selling into China, the next decade is about selling into India. You have to go where the demographic and economic tailwinds are at your back."
Expanding Market Share in India
Major multinational companies are expected to see a significant increase in their market share in India. According to research firm GlobalData, the combined market share of the top five FMCG companies—Coca-Cola, P&G, PepsiCo, Unilever, and Reckitt—is projected to rise to 20.53% in 2023, up from 19.27% in 2022. This growth is largely driven by increased consumer spending in categories such as baby care, consumer health, cosmetics, beverages, and household products.
In contrast, these same companies are seeing their market share in China shrink. China’s prolonged and sluggish recovery from the COVID-19 pandemic, coupled with weak consumer demand, has dampened growth prospects in the region. K Ramakrishnan, Managing Director for South Asia at Kantar’s Worldpanel Division, pointed out that while China’s growth has been sluggish, India’s growth rate of around 4% represents a robust opportunity for the FMCG sector.
Strategic Investments and Product Launches
Consumer goods companies are doubling down on their investments in India. For example, PepsiCo recently launched Kurkure Chaat Fills, a new snack flavor aimed at the Indian market, while Coca-Cola has upgraded its packaging to extend product shelf life. Nestle is preparing to introduce its premium coffee brand, Nespresso, by the end of the year. These strategic moves have resulted in increased household penetration for these brands, with Coca-Cola seeing a 24% rise in India, PepsiCo 12.7%, Nestle 6.7%, and Reckitt 3.8%, according to Kantar data.
Mondelez International, known for its Oreo cookies, is also expanding in India by launching new pack sizes and partnering with the Lotus Biscoff brand. The company reported mid-single-digit growth in the chocolate category during the second quarter, further underscoring India’s potential.
A Stark Contrast with China’s Performance
The focus on India comes at a time when China’s consumer market is faltering. Nestle, the maker of KitKat, reported a decline in sales in the Greater China region in the latest quarter, citing weaker-than-expected economic and consumer sentiment. Don Nesbitt, Senior Portfolio Manager at F/m Investments, noted, "China has always been considered the darling of growth for investors, but as we have seen, that bloom is off the rose there."
In contrast, PepsiCo’s Africa, Middle East, and South Asia region, which includes India, has shown positive growth, with the company projecting India to be its "big growth space" moving forward. Coca-Cola also posted double-digit volume growth in India, while Unilever recorded sequential improvements in the country.
Source: Reuters
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