The packaged goods industry in India is undergoing significant changes due to challenging demand conditions. Many companies are discontinuing non-performing brands, shelving expansion plans, and reducing manpower costs in anticipation of a demand revival in their core businesses over the next two quarters. Nestle India, for example, has phased out select variants of Maggi noodles, while Dabur India has exited the diaper, tea, and health drink businesses to focus on core categories.
The unseasonal rains in India have had a significant impact on the sales of summer-centric products such as soft drinks, cold juices, and ice-creams. Companies that typically set up temporary small shops in rural markets to cater to seasonal demand have had to abort their plans this year. As a result, sales of large packs have declined, and companies are rationalizing manpower costs.
The weather office has predicted above-normal rainfall in the second half of the monsoon season, which is expected to further impact sales. Distributors have noted that companies are now discontinuing products that are not performing well within a shorter period, typically a few months, compared to the previous 12-15 months.
At least two dozen low-performing sub-brands are being discontinued across various categories, including tea, Ayurvedic creams, oral care, toothpaste, and soap. Emami’s hair oil business, led by the Kesh King brand, has declined 5% year-on-year, and the company is revamping its businesses with strategic transformations. The company will relaunch the Kesh King hair oil franchise in the current quarter to improve brand relevance and future growth.
Despite the challenges, most listed FMCG companies have provided guidance of high single-digit growth for FY26, driven by sequential demand recovery, a better-than-expected monsoon, easing food inflation, rural momentum, and urban revival. However, research firm Numerator has reported that demand for groceries, household, and personal care slowed to 3.9% by volume year-on-year in the June quarter, impacted by unseasonal rains. The industry is undergoing significant changes, and companies are adapting to the new reality by rationalizing their portfolios and focusing on core businesses.