According to global professional services firms Aon and Deloitte that also track talent trends including compensation, the pay hikes for this sector will be in the range of 8.5-9.8%.
This is in contrast to the previous year when average pay hikes were better, after two years of pandemic-induced disruptions, executives said.
“Projected salary increments in the consumer sector continue to be stable around the 9.5% range in line with the last three years, however, slightly lower than double-digit increments that were projected last year, given the slowdown in rural demand,” said Roopank Chaudhary, partner at Aon India.
Krishna Malladi, director at Deloitte Consulting, said the pay hike for last year was 8.9% to 9.0%. “This year, the increments are expected to be moderately lower than last year,” he said.
Industry leaders that ET spoke with confirmed the same, but did not wish to reveal their names as the appraisal process is ongoing.Aon shared these findings based on a survey conducted in October 2023 where the participating FMCG companies had a headcount in the range of 5,000-10,000 and range of revenues from $10 million to $20 billion or more. Top 32 FMCG companies participated in the survey.Executives at FMCG companies said hikes for the year will be nominal and in high single digits.
“This is due to the sector recently being under stress, with continued slowdown in the rural sector weighing down volume growth,” said an executive at one of the leading FMCG companies. Added to this is the limited uptick in demand and resurgence of regional brands across sectors like toothpaste, tea and snacks taking away share from national players, the person said.
For summer-facing categories such as beverages and ice-creams, the past year was challenging since unseasonal rains washed out sales in the crucial April-June quarter after record-high summer temperatures in 2022. April, May and June contribute close to half of annual sales for summer-facing sectors.
Coca-Cola, Nestle and Parle Products have yet to formalise their appraisal cycles for the year, officials said. ITC said it would be unable to comment while an email sent to PepsiCo remained unanswered till the story went to print.
“Most companies in the consumer sector are actively tracking employee costs relative to growth in revenue and opex,” said Malladi of Deloitte. Given this and the larger business realities, increments are expected to be in the region of 8.5-8.7% for the consumer sector, he said.
Building leadership bandwidth to deal with the increasingly volatile market is appearing as a critical need in the industry, experts said.
“We are also seeing sharper performance differentiation with only 8-9% of employees in the highest performance rating block,” said Malladi. Increments for this group are also more aggressive at approximately 1.8x of average increments, he said.
FMCG sales grew just 2% by value in 2023, down from 7% in 2022, dragged down by slowing rural sales, erratic monsoons, and reduction in edible oils prices, which impacted value growth, according to retail intelligence firm Bizom.
“Key downside risks are continued delayed recovery in demand and irrational competition,” ICICI Securities wrote in a report on January 20 after India’s largest consumer goods maker Hindustan Unilever (HUL), which makes Dove soap and Brooke Bond tea, reported flat December quarter growth. ICICI attributed the weak numbers to “continued stress on bottom-of-pyramid consumption, delayed winters despite the premium segment and organised channels outperforming and increased competitive intensity from small players.”