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Price hikes by companies due to inflationary pressures and slowdown in rural consumption dragged down the FMCG sector’s volume growth in the January-March quarter.
As per estimates by research and insights firm, NielsenIQ, in the March quarter, FMCG sector saw a volume de-growth of 4.1 per cent compared to the same period last year. In value terms, the industry did clock growth of 6 per cent but this was largely driven by double-digit price growth.
Rural markets
While decline in consumption was seen across the country, the research firm pointed out that the slowdown in consumption was more stark in the rural region. FMCG sector saw a volume degrowth of 5.3 per cent in rural regions in the March quarter compared to the same period. This is the “highest consumption slowdown” in the last three quarters. “Rural markets witnessed higher price increases than urban markets (11.9 per in rural compared to 8.8 per cent in urban in January-March ’22 vs. YA) in the country, and hence more stress on consumption decline,” NielsenIQ stated. Meanwhile, volumes saw a dip of 3.2 per cent in the urban markets during the quarter compared to same period last year.
“In continuation from last year, macro-economic indicators are still guiding consumption patterns for the Indian consumer, and they are feeling the impact of the price increase—especially in the food and essentials categories”, said Satish Pillai, Managing Director India, NielsenIQ. He added that impetus by the government if supported by normal monsoon in the country would be encouraging.
Foods and Non-Foods
In the heightened inflationary environment, consumers prioritised their spends on food categories over non-food categories and shopped for smaller packs. For instance, the staples product basket which include refined and non-refined edible oil, vanaspati, packaged atta have seen a nearly 15 per cent price hike.
“Consumers are scaling back more on discretionary spends within the non-food categories. Overall, there is an evident shift by consumers to smaller pack sizes to manage external factors for both foods and non-foods. Keeping this in mind, manufacturers and retailers need to ensure the right assortment of pack sizes across brands to account for this consumption shift”, said Sonika Gupta, Customer Success Lead (India), NielsenIQ
Within the food segment, the impulse food category that includes products such as salty snacks, chocolates and confectionery, saw a positive volume growth of 1.5 per cent led by smaller packs, the report added. Overall, non-food category witnessed a volume de-growth of 9.6 per cent while foods category saw volume de-growth of 1.8 per cent in the March quarter compared to last year, the insights firm estimated.
Channels
Consumers’ preference for smaller packs also impacted traditional trade stores. “Modern trade (supermarkets) shows evidence of stabilisation in recent quarters, with volume growth on the uptick (5.3 per cent). Traditional trade has seen a –4.9 per cent volume de-growth led by shift towards smaller packs. E-commerce is growing with 5.6 per cent versus year-ago period in terms of value growth,” NielsenIQ stated.
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