Falling inflation, GST reset narrowed gap between unbranded and branded FMCG, says Marico CEO

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A sharp drop in inflation and the goods and services tax (GST) reset are structurally improving affordability, encouraging a gradual shift from unbranded to branded products, particularly in packaged foods, Marico managing director  and chief executive officer Saugata Gupta told Moneycontrol in an interview.

The narrowing price gap is beginning to support organised players, even as demand recovery remains uneven and lower-income consumers continue to calibrate discretionary spending, he said.

Analysts expect headline inflation to remain well below the RBI’s 4 percent threshold for the remainder of the current fiscal.

Also read: Marico sharpens premiumisation strategy to de-risk portfolio concentration: CEO

"The packaged food penetration in India is quite low. Boost in foods is expected to positively impact urban consumption, as consumers increasingly prefer hygienic and convenient packaged food options," Gupta told Moneycontrol.

The comments come as a Deloitte report said in May that “urban elites” are spending nearly 50 percent of their food budget to packaged and prepared foods. The market is driven by rapid urbanisation, evolving consumer preferences and an increasing demand for convenience-oriented food products.

"Most products are now at 5 percent GST, except some skincare, hair serums, and the rest at 18 percent. The biggest impact is on food — most packaged food now fall in the 5 percent GST slab,” he said.

Food forms a significant part of the consumption basket for the bottom of the pyramid, so they may shift from unbranded to branded products. “We are now seeing some gradual improvement. This reduces the gap between unbranded and branded products, which helps organize the market and supports the growth of branded players," Gupta said.

Marico's Food portfolio crossed Rs 1,100 crore annual recurring revenue) in the second quarter, with Saffola Oats continuing to gain market share while the honey and soya chunks continue to scale up.

Also read: GST-led price correction in food items to boost branded consumption, says Marico CEO

During the quarter, the company’s health focused food brand True Elements expanded its ready to eat portfolio with the prototyping of protein bars and overnight oats.

"People are aspirational for brands, and if you look at other sectors — telecom, data and airlines — here in India, the common trends have been about driving affordability and accessibility or availability. FMCG is fairly distributed. It doesn't depend on one category of consumers," Gupta said.