Inflationary pressures and rural consumption slowdown dragged down the FMCG industry’s volume growth in the July-September quarter, though value growth was in the double digits.

Price-led growth

According to insights and research firm NielsenIQ, the industry’s value growth was pegged at 12.6 per cent in the September quarter compared to the same period last year, largely backed by urban demand as metros witnessed an upswing. Meanwhile, volume growth was estimated to be just about 1.2 per cent.

“Overall, the Indian FMCG industry witnessed a significant price-led growth in the quarter on account of increasing commodity and raw material prices, and high fuel prices leading to higher transportation costs. This resulted in a double-digit nominal growth but a drop in consumption (volume) growth for the industry,” NielsenIQ stated.

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The price-led growth or value growth was largely driven by the food basket which contributes 59 per cent to the overall FMCG industry. Volume growth was driven by packaged rice, breakfast cereals, butter-margarines and chocolates.

Macro-economic factors continued to impact consumption growth, NielsenIQ added.

Rural regions see consumption decline

Inflationary pressures led to consumption decline in rural regions in categories such as edible oils, hot beverages such as tea, salty snacks, personal care and fabric care. FMCG sector volume witnessed a decline of 2.9 per cent in rural regions. However, FMCG value growth in rural regions stood at 9.4 per cent in the September quarter.

Diptanshu Ray, South Asia Lead, NielsenIQ, said, “The price increase has led to rationalising consumer basket which led to a decline in rural consumption.”

He added that urban market-led metros saw in FMCG growth and cities such as Kolkata, Hyderabad, Mumbai and Pune led the growth. “The quarter ending in September saw consumer purchases inching back to pre-Covid levels. Though there continues to be pressure on the consumer, this is offset by the encouraging uptick in modern trade in the urban markets,” Ray said.

Price segments

Popular price segments across the FMCG industry saw an uptick in contribution to 59 per cent (compared to 56 per cent in Q1 2020), while mass price segments saw a drop in value contribution over the last quarter to 17 per cent in the September quarter (compared to 19 per cent in Q1 of 2020).

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“Over the recent months, input cost pressure has forced manufacturers to increase prices, especially of food products and cooking mediums. This had a severe impact on small manufacturers in the September quarter,” said Sameer Shukla, Customer Success Lead for NielsenIQ South Asia.

Modern trade stores grew 17 per cent in this quarter, while e-commerce growth remained steady on account of higher base effect, the NielsenIQ report added.