Volume growth for FMCG industry under stress, consumers rationalising spends, shifting to unbranded segments: Kantar

FMCG sector’s value growth is outpacing volume growth on the back of inflationary-led price hikes. According to marketing data and analytics firm Kantar, which tracks household consumption, FMCG sector’s volume growth was pegged at 4 per cent and value growth at 8 per cent in the 12 month period ended May 2022 over the corresponding period in the previous year.

This is leading consumers to shift to unbranded products and to also rationalise spends on personal care and household care segments. Despite adoption of shrinkflation strategies by companies, the magic price of ₹5 and ₹10, especially in food categories, remains popular.

Varied consumer responses

At the same time, the premium segment across categories continues to see growth, albeit slower than last year, indicating different consumer cohorts are responding differently to inflationary pressures, as per insights released by Kantar.

In the 12 months period ended May 2021, FMCG sector’s volume growth was estimated at 7 per cent and value growth at 12 per cent over the corresponding period.

K Ramakrishnan, MD-South Asia, Worldpanel Division at Kantar told BusinessLine, “There is a significant stress in terms of volume consumption in the FMCG sector. Value growth is being led by price hikes. However, there are definitely signs of recovery in terms of easing of certain input costs such as edible oils. This could lead manufacturers to take actions that could make consumers a little more open to volume spends in the coming months.”

Rise of the unbranded

In response to price hikes, there has been a significant rise in households buying FMCG products under promotional schemes. They also seem to be adding unbranded products to their shopping baskets in categories such as edible oils, spices, toilet cleaners and floor cleaners.

At a time when most FMCG companies have reduced weight of packs to mitigate input cost pressures, the magic price points of ₹5 and ₹10 remain popular. Infact, consumers are buying more packs at these price points on more occasions to satiate grammage requirements and manage spends, Kantar noted. “There are also early signs of emergence of ₹20 as a magic price point for consumers in categories such as biscuits, toothpastes, hair oils and skin creams,” added Ramakrishnan.

Growth in premium segment

Despite inflationary pressures, the premium segment in categories such as food and beverages (13 per cent) , personal care (1.2 per cent) and home care (10 per cent ) witnessed volume growth (MAT April 2022). As per Kantar, growth rates at the premium end have slowed down, but strategies such as offering specialised products and small packs to recruit new consumers are helping premium brands clock growth.

“There is a kind of bipolarity in behaviour visible from the consumer lens. At the upper end, there are consumer cohorts who continue to spend on discretionary categories especially since they couldn’t do that in the past two years due to the pandemic. These consumers are also not compromising on purchasing premium brands. At the lower end, while consumers are showing tendencies of stress, they are also increasing spending on certain categories such as grooming,” Ramakrishnan explained.

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