Inflationary pressures, rural slowdown hurting small FMCG makers, says NielsenIQ

Meenakshi Verma Ambwani | | Updated on: Dec 01, 2021
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Spike in input costs being passed on to consumers, thereby impacting consumption

Inflationary pressures are not only burning a hole in the consumer’s pockets but also hurting small manufacturers in the FMCG industry, much more than the large manufacturers. According to research and insights firm NielsenIQ, large FMCG manufacturers’ contribution to the overall industry’s value growth was pegged at 76 per cent in the September quarter. But small manufacturers’ contribution stood at a mere 2 per cent in this period.

Large manufacturers are defined as those that have a turnover of more than ₹600 crore, while smaller players are those that have a turnover of less than ₹100 crore. Overall the industry clocked 12.6 per cent value growth in the September quarter compared to the previous year.

Sameer Shukla, Customer Success Lead, NielsenIQ South Asia told BusinessLine, inflationary pressures and rural consumption slowdown has had a severe impact on small manufacturers in the September quarter leading to 14 per cent of them churning out of the market compared to a year-ago period.

Change in price segments

With the increase in input costs, manufacturers have had no options but to pass it on to consumers and this has had a clear impact on consumption trends. “Some consumers who were earlier opting for premium price segments across categories have downgraded to popular price segment due to this price rise. Meanwhile, some who used to buy the popular price segments have downgraded to the mass priced packs or the entry-level packs,” Shukla explained.

He added, “But many consumers of mass-price segments have either reduced consumption frequency or moved out of the category by switching to unorganised segment. Small manufacturers have a higher dependence on mass-price segment and so when this segment comes under stress, then small players come under stress.”

According to data by NielsenIQ, popular price segments, across FMCG industry saw an uptick in contribution at 59 per cent (56 per cent in Q1 2020) while mass price segments witnessed a drop in value contribution to 17 per cent in the September quarter compared to 19 per cent in March quarter in 2020.

Shukla said that the contribution of the popular price segment going up and the mass price segment going down indicates that some consumers have moved out of the organised segment categories. He said this trend was most visible in categories such as edible oils, hot beverages such as tea and impulse food such as salty snacks.

“Small players also have a stronger foothold in rural markets. So, the stress in rural consumption has also adversely impacted small players,” he added. FMCG volumes in the rural regions declined by 2.9 per cent, while it clocked value growth of 9.4 per cent in the September quarter, as per NielsenIQ.

Published on December 01, 2021

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