Adoption of high-priced categories and shift to branded products during the pandemic, has made FMCG sector’s value growth to outpace volume growth even as consumers coped with financial uncertainties in pandemic times.
According to household data by consulting and research firm Kantar, FMCG sector’s value growth was pegged at 11 per cent compared to volume growth of 4 per cent in the 12 month period ended May 2021, over same period in the previous year. At the same time, rural markets witnessed higher value and volume growth compared to urban region during this period.
K. Ramakrishnan, Managing Director- South Asia, Kantar Worldpanel Division told BusinessLine , “One would have expected that during the pandemic due to high degree of uncertainty in consumers’ minds, they would go for less expensive products. But instead consumers expanded their FMCG baskets with addition of high-value categories such as hand sanitisers and surface cleaners and put spends on immunity-boosting products. They also moved to more premium products even in essential categories. They also gravitated toward branded products as they sought trusted brands in various categories.”
The consumer research firm further pointed out that disbursal of free wheat or atta by states impacted purchases of packaged atta. Excluding the packaged atta segment, the FMCG in-home volume growth was estimated to be at 8 per cent during this period, still lower than 11 per cent value growth.
Despite the pandemic outbreak, addition of new categories to consumer baskets and shift to branded goods also led to rural region’s value and volume growth to outpace urban region. Value growth in rural markets for the 12 month period ended May was 11.6 per cent compared to 10.2 per cent growth in urban markets. At the same time volume growth for rural regions was pegged at 4.4 per cent versus 3.3 per cent growth in urban markets.
“While there may have been a blip in rural demand due to the second wave of the pandemic, it was not very significant enough to cause a deceleration. The fundamentals of rural demand growth remain strong and it will probably continue to outdo urban growth. Factors such as good monsoons, good harvest and support prices and government’s employment schemes among others will enable robust demand growth in rural regions,” Ramakrishnan added.
According to Kantar, rural households not only continued to buy more number of categories in their baskets but also held up volumes much stronger despite rising cases during the second wave. Food and beverages, household care, and personal care segments have been driving this growth. Penetration of home hygiene products such as toilet cleaners, utensil cleaners and floor cleaners in rural region also improved year-on-year during this period.
“Hand sanitizers is no slouch in rural regions. It may be significantly under-penetrated (22.3 per cent rural versus 40.1 per cent urban, MAT May’21) but reaches more rural households than urban households because of the sheer size of the rural population,” Kantar stated.
About 4.44 crore rural households were found to be using hand-sanitisers compared to 4.26 crore homes in urban India in terms of absolute numbers. Ramakrishnan stated that handwashes penetration was found to be higher in urban regions compared to rural. He added with companies pushing smaller packs of sanitisers and lack of running water are factors driving hand-sanitisers penetration in rural regions.