The Rs 5-lakh-crore domestic fast-moving consumer goods (FMCG) market witnessed a decline in both overall value and volume growth in the September quarter compared with the year-ago period, as a slowdown in urban areas took a toll on business, a report by market researcher NielsenIQ released on Thursday showed.
Urban sales contribute to two-third of the FMCG industry sales, while rural contributes a third.
The overall FMCG value growth came in at 5.7% in the September quarter versus 9% a year ago. The overall volume growth stood at 4.1% in the quarter versus 8.6%.
Both urban and rural volume growth in the September quarter at 2.8% and 6%, respectively, are below the growth numbers reported in the same quarter last year (10.2% urban growth and 6.4% rural growth reported last year).
Sequentially, the picture changes as rural volume growth is twice as fast as urban volume growth. While the urban volume growth was stagnant at 2.8% in the June and September quarters each, rural volume growth improved from 5.2% in the June quarter to 6% in the September quarter, NielsenIQ data show.
“There are macroeconomic factors that are a concern, plus the high base effect within urban is also there. In contrast, rural has strong tailwinds from the monsoons and good harvest this year. So, the rural engine of growth should continue,” Rohit Jawa, CEO & MD, Hindustan Unilever (HUL), said, after the company’s recent September quarter earnings.
Price-led growth improved to levels of 1.6% versus 0.4% seen a year ago. This was on account of price hikes taken by companies in response to inflationary pressures in tea, palm oil and copra among other commodities.
“The Indian FMCG industry showed resilience with steady value growth and marginal price increase. Small manufacturers are rebounding after a recent decline, while major players trail in value growth,” Roosevelt Dsouza, head of commercial, India, NielsenIQ, said in a statement on Thursday.
Large companies with sales between Rs 1,000 crore and Rs 5,000 crore, accounting for 20% of the FMCG market, experienced the highest growth in the quarter at 9.6%, according to the market research agency. Small players, on the other hand, with sales of less than Rs 100 crore, accounting for 17% of the market, rebounded after three consecutive quarters of consumption decline, clocking a growth of 5.9% in the quarter.
These small players outpaced the growth of giants, those exceeding Rs 5,000 crore in sales, who control 46% of the market. These giants–including HUL, Nestle, Dabur and Tata Consumer among others–reported lower value growth and declining volumes in the September quarter compared with the year-ago period, NielsenIQ said.
Most CEOs of top FMCG companies have flagged urban slowdown concerns in their recent Q2 commentary, saying that the pain will last for some time. This is due to inflationary concerns notably in food categories, which is hurting the middle class and a high base effect that is kicking in now.
Food, which contributes 65% to the FMCG consumption basket, saw a volume growth of 3.4% in the September quarter versus 9% reported a year ago and 2.1% seen in the June quarter, NielsenIQ said.
The uptick in food volume growth seen sequentially was due to staple categories – edible oils, packaged atta, and spices – which despite price growth saw good consumption, the market researcher said.
Non-food categories such as home and personal care (HPC) stabilised to levels of 6% in the September quarter versus 6.7% seen sequentially. This stabilisation in consumer demand for HPC categories is observed in both urban and rural areas, NielsenIQ said. A year ago, HPC saw an 8.9% volume growth.
On the other hand, OTC categories saw a 2.1% volume growth in the September quarter versus 5.1% seen sequentially and 0.2% seen last year.
Also, traditional trade volumes grew by 4.1% in the September quarter, compared with 3.1% in the June quarter and 7.5% a year ago. Despite a slowdown, modern trade volume growth at 3.8% has outpaced the overall urban volume growth (2.8%). Sequentially, modern trade volume grew 10.9%, while a year ago, it was up 19.5%.
From: financialexpress
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