FMCG volumes decline by 2.6 per cent in December quarter: NielsenIQ

Meenakshi Verma Ambwani | Updated on: Mar 02, 2022

Gradually, a departmental store in Thiruvanmiyur area of Chennai has begun to get their supplies. For a couple of weeks, the shelves looked empty with shoppers on a panic buying spree. Shops in Chennai have been allowed to operate from 6 am to 1 pm. Photo : Bijoy Ghosh | Photo Credit: BIJOY GHOSH

Volume decline in rural markets more accentuated than urban markets due to inflationary pressures

Heightened inflationary pressures and other macro-economic factors led the FMCG industry to witness a dip in volume of 2.6 per cent in the December quarter over the same period last year as per estimates of research and insights firm NielsenIQ. The double-digit price hike announced by consumer product companies in response to inflationary pressures in the past three consecutive quarters, led to consumption slowdown in urban regions and consumption de-growth in rural markets in the December quarter, it pointed out.

The industry garnered a value growth of 9.6 per cent in the December quarter againstthe same period last year led by price hikes.

Rural markets hit

Rural markets continued to remain under stress for the second quarter in a row. The volume decline in rural markets in the December quarter was estimated at 4.8 per cent, more severe than the urban markets (-0.8 per cent). In the September quarter, the volume decline was pegged at 2.5 per cent.

Diptanshu Ray, South Asia Cluster Lead, NielsenIQ, told BusinessLine, “Volume decline in rural regions was led by non-food categories even as price hikes have been taken in the food categories of edible oils and staples.. This means consumers have begun rationalising their spends on non-food categories.”

“In the last two quarters, we have observed a continuous pressure in terms of inflation leading to rampant price increases in essentials which has impacted the overall consumption leading to decline in the volume in the December quarter. The impact of these price hikes is being felt more in rural regions compared to urban regions. In urban regions, the price hikes were somewhat balanced out by higher promotions and bigger pack sizes in modern trade stores but not in rural region that relies heavily on traditional trade stores,” he added.

Modern trade stores witnessed a 5.6 per cent volume increase in December quarter over the same period last year due to easing of restrictions and uptick in consumption in the festival season. But traditional trade stores saw a volume de-growth of 3.3 per cent in the quarter under review. In terms of the e-commerce channel, pandemic helped accelerate the penetration of FMCG among online shoppers to 25-30 per cent compared to 15 per cent in the pre-pandemic times, it added.

For the full year of 2021, FMCG industry’s overall volume growth was pegged at 6.3 per cent and value growth at 17.5 per cent over 2020, primarily led by price hikes.

The situation remains volatile as inflationary pressures are expected to continue to remain a challenge for the FMCG industry. “While consumption slowdown is accentuated in rural regions, in December quarter we also saw a slowdown in urban regions for the first time in many quarters ,” Ray pointed out.

New stores added

Meanwhile, the research firm said that the overall number of stores selling FMCG products in India grew at a CAGR of 4 per cent over the period of 2019 to 2021 with the addition of 800,000 stores in the country, with 60 per cent opening stores in rural India. This was higher than the usual annual rate of 1-2 per cent seen in pre-pandemic times.

As part of its Retail Establishment Survey done in December quarter, newer stores also got added to metro India’s retail universe especially in residential areas as consumers stayed and worked from home.

“A structural change is also evident in channel types. There has been change in the offtakes of shops depending on their locations, increase in speciality stores that stock FMCG products and an increase in e-commerce. FMCG companies will need to revisit their go-to-market strategy in accordance with these changes and also cover these new stores,” added Ray.

Published on March 02, 2022
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