Now, since we are interacting with you on the sidelines of the conference, first help us understand that what to your mind are the key takeaways for consumption as a sector because in the quarter gone by we actually got mixed signals. There was sluggishness in volumes. There was a decline in terms of realisations, but there were some categories which did exceptionally well.
Aditya Soman: So, I have covered this sector now for almost 20 years and I have never seen such a mixed set of results. Few things stood out. One, most companies called out that urban consumption was a lot slower than the rural. However, that is just a very simplistic take. If you look a little bit deeper into the numbers, then you will find that even within urban, urban metro cities was the one that actually slowed down very drastically for the last couple of quarters.

If you look at non-metro urban, that has actually grown faster than the rural. Now to my mind, a couple of things that have driven this phenomenon. One, you obviously had some inflationary issues in urban India and overall this led to sort of a slowdown across categories. But to me the bigger issue is in urban metro cities.

We are starting to see an impact of quick commerce which is not captured by surveys by Nielsen or Kantar to the same extent as they cover a traditional retail. So, when the data capture itself is an issue to my mind and we are starting to see this play out very clearly.

If you look at the restaurants and the QSR industry, this trend has been ongoing for some time now where QSRs have underperformed the GOV growth posted by the aggregators and we see a similar trend now play out in FMCG where because of quick commerce, because of modern retail, we are starting to see a divergence in trends particularly in urban large cities and in smaller urban cities where quick commerce is in present for now.

Let us just take a follow-up to that. Will demand slowdown in urban areas be similar to a similar extent of what we saw kicking in just a couple of years ago within the rural space?
Aditya Soman: Great question. So, look with rural it has been more of a challenge with purchasing power where because of high inflation for a period of time it really impacted rural consumption. Secondly, we are starting to see the rural population itself declined where there is sort of large scale urbanisation.

So, to that extent where companies are already reaching out to a large base of rural consumers, incremental consumption has been tougher to come by. Now the expectation was that this time round with higher government spends on the rural India, better monsoon, rural spends would pick up. And while there has been a relative pickup on a weak base, if you look at this trend over a longer period, actually growth still continue to be quite sluggish in the rural India as well.

I think in urban, it is a slightly different story. I think what we are seeing is that look consumption on its own is not being impacted, but what we are seeing is a clear shift in consumption patterns where historically a lot of the consumption would have gone towards QSRs, towards FMCG, towards traditional retail, that is shifting now whether it is a phenomenon like a fast fashion, whether it is quick commerce, whether it is a food delivery, or concert sales.

We are clearly starting to see a shift in consumption where consumption is more aspirational, more youth driven and differentiated from what it was in the past. So, slightly different trends, with rural it was an affordability and population growth driven slowdown, in urban India it is more of a shift in aspiration. And I feel that companies or traditional companies will need to match that shift in aspiration from the consumers.

Also, a common concern that we have seen across the board has been commodity inflation, especially across categories like palm oil, cocoa, coffee, as well as tea. Do you believe that the worst in terms of the commodity inflation is now behind us or do you expect a few more quarters of this pressure?
Aditya Soman: Absolutely. I think commodity inflation has spiked up, particularly like you said palm oil, coffee, cocoa, some of these categories have seen very sharp inflation. Tea has starting to see inflation again. Now, if you go back in time, in periods of inflation actually the large companies historically did very well because they could take up prices a little lesser than the smaller companies and still maintain profitability and that allowed them to gain market share in inflationary situation.

So, if you go back in time when palm oil prices went up, typically the large soap market leaders gained market share. When tea prices went up, the market leaders gained market share. This time around, it is a little bit different where prices have gone up, but the market shares have not necessarily devolved to the market leaders. And one reason we see for this is that there are more competitors who are larger in scale, who can absorb pricing a little bit better than what they could in the past, so it is not so much a function about prices going up, I think that happens every now and then. I think the question will come to how much pricing power the traditional companies still maintain and how much pricing they can pass on to consumers.

E-commerce players are making a move to quick commerce. What is your outlook on the sector now?
Aditya Soman: Yes, not really, not a stock specific. The only thing I will say is, we really see a huge opportunity in the whole sector whether it is food delivery and of course, quick commerce. We are just scratching the surface on quick commerce. So, from that perspective, I would say very positive on the overall space.

And what percentage of the overall sales of FMCG companies will be contributed by quick commerce in the near future? How do you expect the space to grow?
Aditya Soman: Of course, that differs from company to company. We have actually got a view that quick commerce goes from being sort of a $6 billion GOV as of today on an annualised basis to being $18 billion by fiscal 27 and then about $78 billion by fiscal 34, so exponential growth at least in the near term so that should sort of answer your question.

In terms of context, I mean, the overall FMCG industry in India, if you just look at the organized sector would be about $80 billion. So, it will be a very significant chunk of that FMCG spend.