The FMCG industry ended 2022 with value growth of 7.6 per cent in the December quarter, down 1.6 per cent compared to the September quarter, according to estimates by NielsenIQ. This decline was attributed to flat volume growth and a drop in price growth due to cooling off in inflationary pressures. Value growth in December was estimated at 2 per cent lower than the year-ago period (9.6 per cent).
The industry’s volume growth in the December quarter was flat compared to the September quarter (-0.3 per cent vs -0.6 per cent). Volume growth was in negative territory for the FMCG sector throughout 2022. While the urban market continued to see positive momentum clocking volume growth of 1.6 per cent, rural volume growth carried on with a negative trajectory for the sixth consecutive quarter (-2.8 per cent).
The industry’s price growth in the December quarter was pegged at 7.9 per cent, the first time to be estimated at single-digit growth in six quarters.
Satish Pillai, MD-India, NielsenIQ, said, “Over the last year, consumer spending was impacted primarily because of inflation, which was echoed by consumers’ shift to smaller packs, and by manufacturers via grammage reduction. Consumers in Rural India have particularly felt this pressure the most, and rural markets see continuous negative consumption growth.”
Traditional trade, known as kirana stores, continued to witness negative volume growth (-1.5%) for the 5th consecutive quarter. But modern trade continued to clock double-digit value growth (23.3 per cent ) and volume growth (12.6 per cent) versus a year ago.
“It is encouraging to see positive notes in the organised sector, with Modern Trade growing double digits in the last two quarters of the year and absolute consumption levels continue to be higher than pre-covid,” Pillai added.
In terms of regions, North Zone saw an uptick to positive volume growth (0.1 per cent) after five consecutive quarters, while the East remains stable (0.6 per cent). Although the West and South Zone continue showing negative consumption growth, there are marginal improvements against the same period last year, the NielsenIQ report added.
Consumers continued to prioritise spending on food products. The volume growth for food segments, including staples and impulse categories, was pegged at 1.6 per cent in the December quarter compared to a year ago. However, the non-food segment of FMCG continued to see consumption decline (-4.6 per cent ) compared to a year ago period.
“Consumers continue to feel inflationary pressure while manufacturers move away from promos to maintain the margins. Manufacturers should continue to support small packs in their portfolio as means to drive consumption, especially for bringing back relevance in case of non-food categories”, said Sonika Gupta, Customer Success Lead (India), NielsenIQ.
Companies were seen cutting down on promotions across categories such as washing powder, detergent bars, soaps and shampoos, while retailers were seen reducing stocks of such non-food items.
“Small manufacturers continue to drive consumption growth through food basket while in non-food, small players impacted due to higher price growth,” NielsenIQ added.