Economy

FMCG sector expected to stagnate in 2020; Nielsen cuts growth forecast, again

Meenakshi Verma Ambwani New Delhi | Updated on July 30, 2020 Published on July 30, 2020

FMCG industry was hit in the April-June period with a 17 per cent decline in sales value growth compared to the same quarter of 2019   -  REUTERS

Q4, however, may see better growth driven by festive season, rural demand

For the second time Nielsen has slashed annual growth forecast for the FMCG sector in India. The industry is expected to witness flat growth in full year of 2020 given the unprecedented dynamics of the market after severe nationwide Covid-19 pandemic induced lockdown, closure of stores and disruption in supply chain that impacted demand in the April-June quarter.

In April, the market research and insights firm had projected an annual growth rate of 5-6 per cent for the FMCG sector. However, Nielsen has now slashed its annual growth forecast to a flat growth range of -1 to 1 per cent. It said that the “bellwether FMCG industry which was trying to revive from a tough 2019 year, was significantly hit in the April-June period with a 17 per cent decline in sales value growth compared to the same quarter of 2019.” Prasun Basu, South Asia Zone President, Nielsen Connect said this was the worst quarter the FMCG industry has witnessed in a long time.

In April-May period, the industry recorded a decline in value growth by 28 per cent compared to same period last year. However, as the country gradually moved towards unlocking economic activity in June, the industry clocked a value growth of 4.5 per cent aided by opening of stores and normal consumption levels across categories.

Nielsen expects this revival trend to continue in the second half of the year depending on factors such as curbing of spread of Covid-19. “ We are expecting to see more growth in fourth quarter than in third quarter due to revival of spends in the festival season. We won’t be surprised if Q3 delivers growth levels similar to the June growth,” Basu added.

Rural outpaced urban

Rural markets led the industry revival in June and clocked a value growth of 12 per cent over June 2019 and grew three times of all India FMCG growth, Nielsen pointed out. “At an overall quarter level also, rural markets were less impacted as compared to their urban counterpart (11 per cent decline for rural versus 20 per cent decline for urban),” it added. Factors such as lower infection rates of Covid-19 in rural areas leading to lesser disruption in economic activity and retail stores opening, normal monsoons and rural stimulus push by the government also contributed to this revival.

Asked if the rural growth will sustain in the coming months, Basu said, “Rural has been comparatively more insulated from the pandemic compared to urban regions. We also expect to see positive impact on rural demand due to the reverse migration among other factors with the hopes that the pandemic spread does not intensify further in the hinterlands.”

Meanwhile, June also witnessed a bounce-back in demand for non-food categories such as personal care and home care.

In the April-June quarter, lockdown conditions impacted traditional stores and kiranas more than organised trade and e-commerce channels. “On entering the unlock phase,traditional trade regained its share of trade and e-commerce also jumped back to a high growth zone. Modern Trade, meanwhile, struggled with continued restrictions and lower footfalls due to social distancing adherence,” Nielsen report added.

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Published on July 30, 2020
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