Economic upheaval has reinforced longer-term trends in consumption patterns. The pace of formalisation is expected to slow with easing inflation and improved credit flow to mass-market producers of consumer goods. Demand recovery in the countryside has trailed that in cities and large consumer goods companies have lost some pricing power as rural consumption approaches pre-pandemic levels. Commodity prices, including energy prices, are less volatile, and availability of inputs is improving. Workers have returned to cities giving small businesses improved traction in production. The government is making efforts to push small enterprise towards capacity expansion.
Accelerated formalisation is likely to speed up the private investment cycle by improving capacity utilisation for large consumer goods companies. HUL’s detergent market share is the best in a decade and it will be eager to press its advantage. But secular growth awaits consumer goods companies when the capital expenditure cycle widens to the mass market that creates most of the jobs in the industry. They will have to fall back on traditional growth drivers like product and process innovation, distribution and supply chains. Surf Excel has quite a few milestones ahead of it.
