FMCG sales in modern trade stores slow down in June2 min read . Updated: 31 Jul 2020, 06:21 PM IST
- In its quarterly update on the FMCG sector, Nielsen said that while traditional trade channels suffered the most in the June quarter, modern trade, on the other hand, saw a spike in sales in April and May
NEW DELHI : Neighborhood kirana stores returned to growth in June as Indian entered Unlock 1.0 phase, but sales of fast-moving consumer goods (FMCG) though small stores, modern trade or large format grocery chains struggled with continued restrictions and lower footfalls, market research firm Nielsen said.
In its quarterly update on the FMCG sector Nielsen said that while traditional trade channels suffered the most in the June quarter, on account of store closures during the lockdown, modern trade, on the other hand, saw a spike in sales in April and May.
However, as India moved to unlock in early June, footfalls and sales in large stores dwindled.
It also helped that more general stores opened up in June, and the month was marked by a gradual improvement in supplies to small stores. The average number of days of store closure dropped from 11-12 days in April-May to five days in June, Nielsen reported. Neighbourhood grocery stores also showed improved sales as people, wary of stepping out for fear or contracting covid-19 infection, relied on their kirana shops to home deliver goods.
In all, modern trade, that accounts for 10% of FMCG sales in India, was down 5% year-on-year in the June quarter. Meanwhile, e-commerce, that contributes 3% to value of FMCG goods sold grew by 16% in the second quarter, while kirana formats were down 19%, but showed recovery in June.
Nielsen follows a January to December calendar year.
Sales of FMCG via traditional trade channels or kirana stores still account for a bulk of sales—at 88%.
However, the channel was severely impacted during the initial phase of the lockdown as supplies to market came to a standstill and stores were forced to work within restricted hours. But it returned to growth in June.
Modern Trade, on the other hand, had a spike in sales towards the later part of March and early April when consumers used this channel for up-stocking, Nielsen said in its report.
However in June, modern trade struggled with continued restrictions and lower footfalls due to social distancing adherence.
Companies corroborated Nielsen's findings.
“With social distancing becoming increasingly prevalent, consumers favoured neighbourhood general trade stores as well as E-Commerce platforms over modern trade during the quarter," packaged goods company Marico said in its June quarter earnings announced this month.
Overall FMCG sales were down 17% in the June quarter compared to a year ago period, largely impacted by a supply disruptions during the April and May lockdown restrictions.
FMCG companies too are busy filling stock in traditional and e-commerce channels, where demand is high, said an analyst tracking FMCG sector said. Moreover, with kiranas willingly delivering goods home, and taking orders over WhatsApp, consumers remain wary of stepping out.
It could take time for footfalls in modern trade stores to stabilize, the analyst said speaking on the condition of anonymity.
Varun Berry, managing director, told Mint, earlier this month that FMCG distribution on ground remains tough.
“If you look at it, a lot of the malls and modern trade stores are shut. So the modern trade business is taking a beating, the alternate channels which is railways, airways, hotels, motels, all of that is completely shut. As far as traditional trade business is concerned, there are logistical issues of getting products to them," he said.