Changing consumer preferences: Driving potential for the highest growth sector globally

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India's CPR sector sees spending rise, driving 2025 trends like value retail, and job creation.


In brief:

  • The growing purchasing power of the middle-class is shaping many consumer trends from 2024 that will would continue to impact the sector in 2025.
  • 2024 was also a year for contradictions within the sector; while consumer behaviour gravitated towards premiumization there was simultaneously a rise in value retail
  • This year, the focus will be on sustainability, tech integration, expansion, adapting to the buying preferences of consumers for quality, speed, and eco-friendliness.

Changing consumer preferences: Driving potential for the highest growth sector globally

The Consumer Products and Retail (CPR) sector in India saw strong consumer spending in 2024. This trend was observed despite the economic uncertainties seen in many economies across the world. The growing purchasing power of the middle-class economy is shaping many of the consumer trends we saw in 2024 and would continue to impact the sector in 2025. Some of these include the growth of value retail, quick commerce (Q-com), etc. which are not only enabling economic growth but also facilitating job creation in Tier I, II and III cities across the country. 2024 also saw the growing trend for premiumization in various categories, from electronics to FMCG.

In 2024, Q-com grew rapidly, with a focus on fast, convenient delivery which is redefining customer expectation of instant gratification, building networks and supply chain infrastructure. Small retailers got a boost in a competitive digital market. Sustainability and customised shopping experiences became key trends as brands catered to eco-conscious consumers and sought to enhance shopping experiences.

Overall, 2024 was a year of excitement for the CPR sector, but with contradictions. While we saw changing consumer behaviour, such as premiumization across FMCG, consumer durables (CD), and food, we also saw the rise of value retail. We will continue to witness growth of the Tier II and Tier III markets. Brands such as JioMart and BigBasket would expand their reach into smaller cities and towns. We would also witness re-pivoting towards digital.

The industry also witnessed increasing competition, with new entrants and local brands, such as boAt in the electronics segment, disrupting the market by offering competitive pricing and tailored products. It would be interesting to see how the consumer demand for luxury would shape in the coming months. Luxury brands have seen fluctuating sales as consumers prioritize essential spending over high-end purchases. While we may see some mixed results in the short term, the Indian market promises to be the highest growth for the sector globally.

How was 2024 for the sector?

Q- com gallops amidst a slowdown in offline channels

The consumer products and retail sector witnessed a revolution through Q-com across top 50 cities, helping brands grow multi-fold while generating employment for thousands.[i]

Consumption remained strong, yet volume growth across segments remains muted

As the most promising and fast-growing economy, it witnessed a slowdown in consumption demand led by muted spending post pandemic, inflation, lower rural incomes and a shift towards investments and experiential spending.

Premiumization across categories

Electronics, durables and appliances witnessed high value growth, and products like split air-conditioners have seen explosive demand this year. This indicates the inflectionary impact of per capita GDP crossing the US$2000-3000 mark.[ii]

Omni channel and connected commerce redefining FMCG distribution models

Consumer at the centre, businesses have rapidly transformed into omni channel play, deploying technology to drive interplay between channels from product search to fulfilment to reviews/ feedback.

Mid-market players rise to rule

The year witnessed multiple mid-market companies across food, FMCG join the US$500 million-US$1 billion revenue club. These companies have demonstrated unique business models, nuanced to succeed in India, and yet deploying best in class organizations and technology.

Development of food service industry

Aided by food tech platforms, cloud kitchens, greater eating out propensity, premiumization, food service players across cafes, quick-service restaurants (QSRs) and casual dining have seen strong store expansion as stores become productive and reach double digit EBITDA levels, generating cash adequate for investment into new store led growth.

What is the outlook for 2025?

Success of value retail

While masstige and premium retailers struggle to drive same store productivity growth, value retailers have taken the drive to convert unbranded to branded with a fast fashion philosophy, indicating an uprising of the middle-income consumer.

The millennial consumer

2024 saw over two decades of millennials, armed with social media, smart phones, globally influenced narratives drive product development and innovation. Health, sustainability, clean eating, responsible consumption have moved from niche to mainstream and cutting across categories. This would be a key trend impacting the sector in 2025 and beyond.

IPO markets, consolidation led M&A, platform deals

Startups, regional mid-market companies have seen significant shareholder value unlocked through IPOs, strategic buyouts and PE funds building food platforms. The capital availability has provided fuel to drive growth in various categories and markets.

Food services focus on market trends

In 2025 focus will be on sustainability, tech integration, and expansion, adapting to the buying preferences of consumers for quality, speed, and eco-friendliness.

In 2025, CPR sector in India is expected to see further growth driven by digital transformation and changing consumer preferences. E-commerce will continue to grow and dominate in India, with the rise of hyperlocal delivery models and platforms enabling small retailers to compete with larger players. Sustainability will be a key focus, with eco-friendly stores and products gaining popularity across categories, such as apparel and home goods. Brands will also focus more on personalized shopping experiences using AI and data analytics, while the adoption of AR/VR for virtual try-ons and immersive shopping experiences will grow.

Summary 

The Consumer Products and Retail (CPR) sector in India is anticipated to expand further, propelled by digital innovation and evolving consumer tastes. E-commerce will flourish and prevail in the Indian market, bolstered by the emergence of hyperlocal delivery systems and platforms that empower small-scale merchants to vie with large organisations. Environmental sustainability will become a central concern, with a surge in demand for eco-conscious stores and merchandise across various sectors, including clothing and home products. Companies will increasingly emphasize customised shopping journeys.

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