- 09 Apr 2024
- 5 mins read
- By: BlinkX Research Team
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Packaged Food and FY23 – A Love Story
Food has always been a demand segment that can be neither postponed nor dispensed with. But the FY23 love story with packaged foods is a larger signal of people shifting to the organized segment with respect to packaged foods. In fact, packaged foods emerged as an outlier in the domestic FMCG market, with strong contributions to the overall sales performances of major FMCG players like Nestle India, Britannia, Marico, and ITC.
All these FMCG majors reported double-digit growth in the packaged foods segment in the range of 13% to 21% for Q4FY23. The food segment is the only FMCG subset to have maintained a very strong growth trajectory, while non-food categories like home and personal care have faced tepid to marginal growth in FY23.
Table of Contents
- Packaged Food and FY23 – A Love Story
- It was food products all the way
- How packaged foods rallied at Nestle India
- Marico also gorges on packaged food growth
- Britannia leverages its rural franchise
It was food products all the way
In fact, the growth in the FMCG sector was mainly driven by low base effects in the previous year, which was impacted by the second wave of Covid-19. Furthermore, the uptick in packaged foods was despite food inflationary pressures over the preceding quarters. Whereas edible oil prices have gone down in the last few months, milk and wheat prices remained static.
However, none of these factors deterred the chocolate, biscuit, beverage, and snacks categories from reporting atleast 10% growth over the last few months. The smart growth levels in the food segment can be attributed to the sales of smaller packs, bigger distribution push in urban and rural areas, as well as constant new product launches. Also, the COVID pandemic has triggered a subtle shift towards more hygienic products and that is where the packaged foods from the organized segment score higher.
How packaged foods rallied at Nestle India
For Nestle, their packaged food business always had a much better urban skew, as is the only sub-segment of the FMCG category they are present and dominant in. During inflationary times, Nestle India started selling their food in smaller packages. This was aligned to the typical response of customers to price hikes. They prefer smaller packs over opting for cheaper alternatives. Nestle precisely catered to that gap in the Indian market.
Nestle has a Rs5,000 crore capex plan for the next three years, and in addition, is looking to acquire categories such as Chinese Noodles, whose growth is greatly accelerating. Nestle already leads this facet of the FMCG sector, with Maggi being a virtually monopolistic player. However, further acquisitions can help to consolidate Nestle’s position at the apex of the FMCG food pyramid and will also enable them to cater to the very granular needs of unique sets of customers.
Marico also gorges on packaged food growth
Marico set itself a target of nearly Rs850 crores for FY24, after clocking Rs600 crores of food products sales in FY23. Its food segment grew by a substantial 18% in Q4FY23, with Saffola Oats continuing its leadership position in anchoring the company’s growth. Saffola Oats has a dominant 43% market share in value terms. Also, new offerings like Honey Soya Chunks, Peanut Butter, Munchiez and Mayonnaise helped Marico synergize their growth even more. Once again, it was food products segment driving growth at Marico.
Britannia leverages its rural franchise
Britannia had also reported very strong growth numbers for the Q4FY23 quarter as well as for the full fiscal year FY23 in general. Significant distribution gains in their business greatly helped in Britannia’s growth, aided by their strategic partnership with 28,000 rural distributors, while sustaining diligent market practices. Britannia also commercialized two biscuit manufacturing units in Tamil Nadu and Uttar Pradesh, atop brownfield expansion in Odisha.
The bottom line is that food products are driving FMCG growth. FMCG companies are getting savvier and also localizing their global strategies.
Content Source: Financial Express