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The FMCG sector seems to be inching towards a slowdown, with a lower growth rate forecast in the range of 9-10 per cent in 2019, according to market research and insights firm Nielsen.
Earlier, Nielsen had projected a growth of 11-12 per cent for the sector for the calendar year.
“Based on an analysis of key factors, a revised forecast for the year-end of 2019 put All India FMCG growth to be in the 9-10 per cent range,” it said.
It has attributed the overall slowdown in the FMCG space to lower rural demand and other macro-economic factors, such as the slowing GDP driven by weaker household spends and inclining inflationary trends.
In its report released on Wednesday, Nielsen said that the FMCG sector’s growth dropped to 10 per cent between April-June, marking the third consecutive quarter of slow growth.
As per Nielsen estimates, the growth in the FMCG sector was tapering down since Q3 2018, which registered a growth of 16.2 per cent. In the subsequent quarters — Q4 2018 and Q1 2019 — the growth rate was 15.7 per cent and 13.4 per cent respectively.
The growth stood at 10.6 per cent in the April-June quarter in 2018.
Rural growth
Sunil Khiani, Head, Retail Measurement Services, Nielsen South Asia said that rural growth has slowed at double the rate of urban growth in the recent quarters. Rural India contributes nearly 37 per cent to the overall FMCG spends.
The report added that rural slowdown was driven by the northern and western regions, where growth has come down to single digits in the April-June quarter. “Haryana, Madhya Pradesh, Uttar Pradesh, Maharashtra and Assam are leading the slowdown,” it said. Khiani said this was due to slowdown in rural output, reduced government spendings and untimely rain impacting crops in most North Indian markets.
Replying to a query on when the growth rates are likely to improve this year, Khiani said: “From 10 per cent growth in April-June 2019, our outlook for growth for the next quarter stands at 7-8 per cent. So it will be critical how factors such as monsoon and government spending benefit disposable incomes in the rural regions in the coming months.”
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