Despite a drop in prices following GST implementation, consumption patterns across three broad FMCG categories — personal care, household care, and food and beverages — have remained relatively unchanged.
According to data from Kantar Worldpanel, volume growth for the categories did not show a significant jump from the quarter preceding GST implementation in July 2017, to the months immediately afterwards.
While the overall consumption stood at 8.38 per cent in the second quarter of 2017, it dropped to 7.10 per cent in Q3 (when the GST first took effect), but rose to 8.24 in Q4.
In Q2 of 2017, the overall consumption grew at 8.38 per cent, this dropped to 7.10 per cent in the Q3 quarter (when the GST was implemented) and slowly climbed back to 8.24 in Q4 of 2017.
In terms of urban demand, consumption growth across categories fell from 5.85 per cent in Q2 of 2017 to 0.57 per cent in July and recovered to 1.85 per cent in Q4 of 2017.
Rural consumption, however, grew from 10.79 per cent in Q2 of 2017 to 12.82 per cent in Q3 then by 13.74 per cent in Q4.
“While events like demonetisation showed reduction in consumption patterns, with GST there was no major blip in household consumption. Perhaps, one can conjecture that GST weighed more heavily on the marketeers mind than on the consumer. Besides, the price drops were not that significant to make the consumer spend more on FMCG goods,’’ observed K Ramakrishnan, GM and Country Head, South Asia, Kantar Worldpanel.
Kantar Worldpanel deals in consumer knowledge and insights based on continuous measurements by consumer panels and is part of the Kantar Group, the date investment management division of WPP.
In fact, FMCG companies may have benefited from GST with lowered input and logistics costs, but none of it was translated into consumer demand going up post GST.
“In our view, GST may have impacted primary sales from companies owing to channel partners, pipeline stock holding and many such factors, but consumption growth cannot be seen as one of them,’’ added Ramakrishnan.
Price drops not attractive
Besides, the price drops were also not enough to lure consumers into buying more, since it was taken by not one single player but across the FMCG companies in categories which were not necessarily discretionary in nature.
“There were a few categories where prices have seen a price drop after GST like toothpastes. However, in such categories, all the players seem to have similar price change and there has been no significant impact on the growth of such categories,’’ he added.
The trends in consumption are also being witnessed by FMCG players such as Dabur, which has recently announced its Q4 results.
During an analyst call, Sunil Duggal, CEO, Dabur, said: “While the impact of GST has been positive due to lower input costs, category growth in the past few quarters has been disappointing with muted growth as there is consumer stress in both the urban and rural markets.
“Whatever growth we may had, has been due to our own initiatives and not due to support from the macro factors. Double-digit category growth is not going to be certainty as the cycles of demand is not happening.’’
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.