Sales in the March quarter was driven by price hikes introduced by large consumer goods companies and a strong consumer demand for staples, non-food essentials, and indulgence products
NEW DELHI :
India’s fast moving consumer goods (FMCG) sector reported 9.4% year-on-year growth in the March quarter aided by price increases by large companies across edible oils, packaged foods and tea, and demand for packaged foods such as biscuits, coffee, cheese, ketchup and non-food essentials, said NielsenIQ’s retail intelligence team in its sector update on Wednesday.
“The FMCG industry in India has built momentum by growing at 9.4% in the quarter ended March 2021 over the same period of previous year, after growing at 7.3% in the previous quarter. The consumption-led growth or volume of 5% sustained in the March quarter, with an increase in prices especially of staples boosting foods value growth," it said in its March quarter FMCG snapshot. NielsenIQ follows a January-December quarter. In 2020, FMCG declined 2% in value terms.
The consumer insights provider refrained from giving forecasts on the sector. “For the year, I think it is not good for us to forecast," said Diptanshu Ray, NielsenIQ South Asia lead. “The market is too volatile. Last year we had to amend the forecast a few times. We don’t know how it’s going to shape up and what kind of (virus) mutations will happen. Hence, we will refrain from forecasting at this point in time but we’re keeping a very close watch," said Ray.
Large FMCG companies reported a big increase in March quarter domestic sales. Most companies, however, raised prices, citing high inflationary pressures.
Demand was led by staples, essential non-foods, and indulgence categories, the report said. India is currently under the grip of a second wave that is set to, once again, derail consumption growth.
Analysts said they are yet to study data from April and May to comment on rural markets. However, the spread of infections in India’s villages could have a bearing on mobility and demand, they said.
Rural markets continued to lead growth for the packaged consumer goods market, growing at 14.6% in Q1. Metros, meanwhile, reported a 2.2% growth in the March quarter, turning to positive growth compared to the December quarter. Class 1 towns, those with a population of 1-10 lakh, grew 6.95% in the same period.
“When it comes to rural India, there are both tailwinds and headwinds. In terms of headwinds, the pandemic has spread there and it will have some bearing, however minimal, on supplies with restriction on movements. However, there are a couple of strong tailwinds too. The monsoon projection is decent," said Sameer Shukla, customer success leader, NielsenIQ South Asia.
An increased focus on the Mahatma Gandhi National Rural Employment Guarantee Act in terms of bigger outlay, rise in wages, and increase in minimum support prices of key crops have been instrumental in keeping FMCG consumption in rural markets buoyant, the report said.
The researcher reported a uniform consumption growth across food and non-foods category during the quarter. This included growth for categories such as coffee, breakfast cereals, cheese, ketchup, large packs of laundry brands. Demand for hygiene products such as sanitizers climbed down. Promotions on home care and personal care products helped lift sales.
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