Demand for fast-moving shopper items dwindled within the December quarter as shoppers purchased much less or bought cheaper options whereas corporations took successive worth hikes to deal with margin strain, in flip knocking down FMCG volumes.
Volumes dipped 2.6% year-on-year throughout the festive months of October-December after 5 quarters of development, in accordance with NielsenIQ’s newest Retail Institution Survey.
Rural markets remained beneath stress for the second quarter in a row. “The ensuing consumption slowdown continues to be accentuated in rural markets with – 4.8% consumption degrowth, whereas city markets are comparatively higher at –0.8%,” the report mentioned.
In the meantime, the FMCG business needed to go for double-digit worth development in three consecutive quarters resulting from excessive inflation in uncooked supplies, in a bid to guard its margins. It translated right into a price-driven development of 17.5% compared to a yr in the past. The third quarter noticed 9.6% price-led development over FY21, resulting from inflationary strain and different macroeconomic components.
Conventional commerce in each city and rural markets has seen a – 4.8% quantity de-growth that’s main the slowdown, in accordance with NielsenIQ. “Classes like staples have seen greater worth will increase within the final two quarters, resulting in bigger price-led development in rural markets and, therefore impacting the volumes,” mentioned Diptanshu Ray, South Asia cluster lead at NielsenIQ.
Fashionable commerce, nonetheless, has seen 5.6% quantity development within the three months by way of December on the again of festive demand. “Value development in fashionable commerce was additionally decrease than that seen within the conventional commerce house. This was primarily led by greater promotions and greater pack sizes. Given the value will increase general, producers are additionally taking steps to alter pack dimension in addition to assortment. On the subject of rural India, shoppers are going again to small-pack sizes to counter the value enhance,” Ray mentioned.
E-commerce, in accordance with Nielsen, continued to develop at 15.3% within the October-December quarter as towards a yr in the past. NielsenIQ’s e-commerce shopper panel, which contains 1.6 lakh customers, reveals that penetration of FMCG amongst internet buyers rose from 15% earlier than Covid-19 to 25-30% throughout the pandemic to settle at 25%.
“In e-commerce, every wave has seen the next adoption by shoppers – resulting in the evolution of omnishoppers the place residence care and private care witnesses a continued adoption on the channel,” the analysis agency mentioned.
Indian packaged shopper items corporations together with Amul Ltd., Hindustan Unilever Ltd., ITC Ltd. and Marico Ltd. are inflationary headwinds, prompting them to boost costs of all the pieces from soaps to biscuits.
Amul has just lately raised milk costs by Rs 2 per litre, whereas HUL has elevated product costs within the vary of 1-9% for the second time in February.
Small Producers Hit Hardest
The value enhance continued to impression smaller producers (with turnover beneath Rs 100 crore) as their quantity dropped by 13%, as a result of issue of constant operations with greater prices. However, giant and medium producers remained secure by way of the yr, mentioned Nielsen.
The full variety of shops promoting FMCG merchandise in India grew at a compound annual development fee of 4% over the interval between 2019-2021, with an addition of 8 lakh shops within the nation. Of those, 60% opened in rural India, in accordance with Nielsen.
The annual fee of development has been roughly 1-2% pre-Covid-19. The metro India retail retailer universe additionally grew with new shops opening up in residential areas, to cater to shoppers who had been homebound for almost two years.
The nation’s macroeconomic circumstances are but to get better from the pandemic disruptions, and there’s a long-term impression due to world inflationary strain. “There needs to be a watch-out for continued consumption de-growth impacted by worth enhance,” mentioned Ray.
