FMCG Sector Slows Down In Dec Quarter As Price Growth Tapers: NielsenIQ

India's fast-moving consumer goods sector grew 7.6 per cent in the October-December quarter as price growth tapered during the quarter coupled with weak volumes, according to data by NielsenIQ.

Volumes remained in the negative but witnessed an improvement sequentially.

In the quarter, volumes for the sector stood at -0.3 per cent compared to -0.7 per cent in the July-September quarter.

Price growth during the December ended quarter stood at 7.9 per cent, which is lower than 9.9 per cent in the September quarter.

FMCG companies have been consistently increasing the prices of their goods on the back of higher raw material costs. However, due to a decline in some raw material costs, companies have slowed down on price increases.

NielsenIQ also noted a drop in price growth both in the rural and urban markets; however, urban volumes still witnessed positive growth of 1.6 per cent, while rural volumes still remained in the negative at -2.8 per cent.

"Over the last one year, consumer spending was impacted primarily because of inflation, echoed by consumers in the shift to smaller packs, and by manufacturers via grammage reduction. Consumers in rural India have particularly felt this pressure the most, and rural markets see continuous negative consumption growth," said Satish Pillai, managing director – India, NielsenIQ.

He added, "However, it is encouraging to see positive notes in the organised sector, with modern trade growing double digits in the last two quarters of the year, and absolute consumption levels continue to be higher than pre-Covid."

The food segment continued to witness positive volume growth, within which categories in staples and impulse remain positive.

Non-food consumption continues to decline and has witnessed lower volumes than pre-Covid levels in recent quarters.

NielsenIQ said in its release that in the non-food, there is a lean assortment at retail outlets, and stock levels are also lower. Manufacturers are also reducing promos for categories like washing powder, detergent bars, toilet soaps, shampoo etc.

Even small manufacturers of non-food items are witnessing the pinch due to higher price growth, while small manufacturers of food continue to drive consumption growth.

"Consumers continue to feel inflationary pressure while manufacturers also continue to move away from promos to maintain the margins. Manufacturers should continue to support small packs in their portfolio as means to drive consumption, especially for bringing back relevance in case of non-food categories. Re-evaluation of the portfolio strategy becomes even more important to address the intensifying competition from smaller players as they make a comeback", said Sonika Gupta, customer success lead (India), NielsenIQ.

Northern parts of the country witnessed a positive volume growth of 0.1 per cent after five quarters, while the east remained stable, with volumes at 0.6 per cent. Western and southern parts of the country continued to witness negative consumption growth; however, there were marginal improvements against the same period last year.

In the west, consumption stood at 0.9 per cent due to a slowdown in consumption in the urban and a continued decline in rural. South India's consumption also stood at -0.9 per cent.

"The slowdown in south and west is driven by the food bucket- consisting of staples, impulse & habit forming categories). For staples & impulse, the decline is seen due to high positive growths in the previous year, unlike other zones," NielsenIQ said in its release.