New Delhi [India], June 25 : Aggressive discounting in the FMCG sector is beginning to backfire, with consumers increasingly associating heavy price cuts with compromised product quality, according to a report by financial management firm Emkay Global.
The report points out that, unlike general merchandise, where high-priced items often rely on discounts to drive sales, FMCG buyers are showing a clear preference for appropriately priced, value-driven products.
The observation noted that persistent price hikes paired with frequent discounts are damaging brand perception and creating hygiene issues, even as companies attempt to boost retail margins.
FMCG, which stands for Fast-Moving Consumer Goods, is a term for products sold quickly and at relatively low prices. These products typically have a short consumption period. Examples of FMCG products include food items, beverages, toiletries, and household cleaning products.
"FMCG companies have been hiking prices regularly and have developed the practice of offering discounts. This trend has been different from high-priced SKUs in the general merchandise business, where consumers seek discounts," the report added.
"In FMCG, given the lower price point, this trend is turning negative as consumers believe sub-par products (with lower value) are being pushed. Consumer preference is for aptly priced products," the report added.
"Aggressive discounting has a bearing on brand perception. As a practice, large FMCG companies have increased product pricing where retail margins are enhanced. This has led to a hygiene issue," the report added.
FMCG companies reported a muted performance in the fourth quarter of FY25 due to continued weakness in the urban market. Sluggish demand, higher competitive pressure, and broader economic challenges have weighed on the sector's growth during the quarter.
Going further, the report observes that quick commerce drives better sales in private labels, as the channel has better control over consumers.
In Hyderabad, modern trade and general trade channels have seen impacts from consumers using quick commerce, the report's observation added.
As per the report, as FMCG companies continue to focus on efficiency benefits, personal connections have diluted, impacting them in the market.
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