The FMCG industry’s value growth dipped in the September quarter sequentially due to further decline in rural consumption amidst inflationary pressures.
According to estimates by NielsenIQ, the FMCG industry’s value growth in the September quarter was pegged at 8.9 per cent year-on-year, which was two per cent compared with the June quarter (10.9 per cent). Overall the industry’s volume degrowth was pegged at -0.9 per cent year-on-year. This was attributed to price hikes by FMCG players over the past six quarters.
Rural slowdown
Rural markets recorded a higher volume decline (-3.6 per cent) in the September quarter over last quarter (-2.4 per cent). The consumption decline in rural markets continues to be led by double-digit price hikes by companies and lower unit growth. However, urban markets continued to witness volume growth versus previous quarter (1.2 per cent vs 0.6 per cent).
Satish Pillai, Managing Director – India, NielsenIQ, said, ”Overall, this quarter shows cautious consumption from consumers, primarily due to apprehensions of slowdown and continued inflation. While the pressure of inflation continues, variations in rainfall across rural areas have also led to a softening of indicators for rural markets.” He added that despite markets opening up fully, consumption has not grown, indicating that the festival season was a bit muted.
Leading FMCG companies have also been pointing to continued rural consumption slowdown. Mohit Malhotra, CEO, Dabur India, said the company’s rural business lagged urban business in the September quarter. ”We have seen credit pressures and liquidity pressure in rural business. The problem got exacerbated in rural heartland regions such as UP and Bihar with the monsoon being a little patchy,” he said on an earnings call.
Consumers continued to buy smaller packs as average pack size growth was in the negative territory in CYQ3, the research and insights firm added.
Traditional trade volume degrowth widened in the September quarter (-2.% in Q3’22 from -1.5% in Q2’22). Pillai said traditional trade retailers showed cautious behaviour by keeping leaner assortments and lower stock levels.
Food volume growth
The food segment witnessed positive volume growth in urban markets (3.2 per cent) and a marginal decline in rural markets (-0.3 per cent).
“Staples categories comprising non-refined oil, atta, and rice saw an uptick after being in the negative for the past three consecutive quarters. Impulse categories sustained their double-digit growth,” NielsenIQ added. The quarter saw edible oil makers dropping prices and government measures such as reduction in taxes.
Non-food consumption dipped further in Q3’22 vs Q2’22 (-6.8% vs -6.4%), led by rural, and remained below pre-Covid levels in terms of volume.
Smaller players
Smallers players made gains in volume and value share sequentially due to lower price increases, compared to medium and large players. “Small manufacturers are driving the consumption with positive volume growth of 0.5% in Q3’22, from –9.1% in Q2’22,” Nielsen IQ added.