The battle for shelf space: How reforms ramped up competition in FMCG

India's FMCG market evolves from global-brand dominance to fierce local, regional and digital competition

6 min read Last Updated : Sep 16 2026 | 11:31 PM IST

India’s tryst with global fast-moving consumer goods (FMCG) brands began even before Independence, when Lever Brothers (which later became Unilever) brought in Sunlight soaps in the late 19th century, with its first point of entry in Kolkata (then Calcutta).

In the decades that followed, many foreign brands came into India — from Colgate, Nestlé, and Procter & Gamble, to Coca-Cola.

But all that changed when India enacted the Foreign Exchange Regulations Act, 1973. It forced foreign firms to dilute their equity holding in local units to 40 per cent or less, with some caveats.

That sparked a wave of change, the most significant being Unilever’s dilution of its stake in Hindustan Lever Ltd to 51 per cent, and Coca-Cola’s exit in 1977.

Even so, while options at kirana stores were limited at the end of the 1980s, global names dominated.

Suresh Narayanan, an industry veteran who retired as chairman and managing director of Nestlé India in 2025, tells Business Standard that the FMCG sector had four characteristics before liberalisation. “There were capacity constraints; it was not a demand-led market, but a supply-led one because of capacity constraints and licence raj.”

Second, there were few brands customers could choose from. Third, most products were value for money. And, fourth, distribution was the key competitive advantage. So, companies like Hindustan Unilever or Colgate or Nestlé, which had formidable distribution systems, commanded market share by sheer reach.

All that changed after liberalisation. More foreign produced goods entered the market, but, crucially, Indian competition increased alongside, providing customers a wider range of choices.

In the years since, there has been a pronounced emphasis on catering to regional tastes even as the distribution channel has faced massive disruption with the entry of e-commerce and now quick commerce.

The market expanded after liberalisation, says Namit Puri, India leader, consumer goods practice at BCG. He says, in 1991, India’s FMCG market was roughly worth ₹55,000 crore, based on 1995-96 prices. Today, that number is around

₹25 trillion. “That is almost a 50 times increase,” he adds.

Major global FMCG firms made a beeline to India, starting with Kellogg’s in 1994, Coca-Cola re-entered, followed by Perfetti Van Melle, Heinz and L’Oreal, and others within five years of the reforms.

In the years after the reforms, gross domestic product (GDP) growth increased, and so did per capita incomes. That set the stage for what Puri calls “an out-and-out consumption story”.

That growth also forced companies to adapt their strategies. “The first 30 years after liberalisation were largely about penetration. The next phase is increasingly about consumption depth and premiumisation,” he says.

Of course, Indian majors like Godrej, Parle, Dabur, Nirma, Emami and Haldiram’s did exist before liberalisation. But the average Indian household preferred foreign brands, says R S Sodhi, former managing director of Amul. “In the 1990s, there was a shift with an increase in the number of national brands. The quality of packaging and availability of national brands also increased and an evolution began in the organised Indian food market,” Sodhi explains.

This contradicted some fears in the early reform years that liberalisation would open the floodgates for multinational companies, which would dominate the market.

Instead, what happened was that an increase in competition ensured that companies that understood the Indian customers best could challenge dominant players, and even win. “In categories such as snacking, for example, regional Indian players have become extremely strong. This is really not about MNC domination. It is about the best player winning by understanding the consumer,” Puri explains.

Even existing big brands had to reorient. Deepak Jolly, who has worked with FMCG companies ranging from HUL, Coca-Cola India and PepsiCo India, says in 1994, HUL developed an ice-cream strategy. “We started by bringing in frozen desserts from the US and Europe, and we also launched our own products. Later, HUL acquired Kwality Ice Cream. Walls was a European brand, whereas Kwality was an Indian brand. By bringing these businesses together, we were able to add significant value,” he explains.

The big change in the post-reform period, though, was the increase in domestic competition.

“For example, Dabur had traditionally been known as an Ayurvedic company, but over time it also became a significant food company. So there was a major shift in the way Indian FMCG companies approached the food category,” Jolly says.

A year before liberalisation, the Bombay Oil Industries spun off its consumer products division, which included Parachute and Saffola, to form Marico. ITC entered the FMCG market in 2001. Other big firms have followed since, like Patanjali Ayurved, Adani Wilmar (now known as AWL Agri Business) and Reliance Consumer Products.

As the market started to expand and competition increased so did the fight for market share a decade later.

Narayanan says the fight for market share started really in the 2000s.

“It took a few years for the licence raj to be dismantled and the capacities to be created. So, really, the first decade of

this century is when the whole war for market share and space started to exacerbate,” he explains.

What also happened as companies began to chase market share was that they started to focus on gaining traction in regional markets by launching products catering to local tastes.

Large players themselves have moved into more localised offerings, and regional brands have also picked up, especially in segments like personal care or food items. “There has been a proliferation of regional players and some of them are doing well enough to threaten and take market share from the big national players,” Narayanan explains.

Sodhi also says competition has intensified over the past 10 years for market share. Now, it has reached a situation where established brands are losing out to regional and hyper local brands. “The market is growing at a much faster rate than the individual growth, and the competition for local and hyper-local brands has caused margins to come under pressure as the distribution channels have also started to move towards more organised channels, which include online and modern trade,” he explains.

Of course, the big established brands have also attempted to address this demand. For instance, HUL launched products catering to specific regional tastes, like it did with tea and also in its detergents depending on which region uses hard or soft water.

Additionally, beginning around 2017, distribution channels have also changed from being 100 per cent traditional trade. Now there is strong competition from ecommerce and, increasingly, from quick commerce. “By Q4 of 2025, ecommerce accounted for around 6 per cent of urban FMCG sales, about 14 per cent in metros and around 20 per cent in the top eight metros. Quick commerce contributed more than three-quarters of FMCG ecommerce sales,” says Puri.

In some southern states, ecommerce has already crossed 20 per cent, he adds.That technology-led shift in distribution is rewriting the Indian FMCG story once again.