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Small but big: FMCG records best quarter in a year amid consumption slowdown
- Demand for fast-moving consumer goods in urban markets remained slower than that in rural areas, although volume growth doubled sequentially in the December quarter.
New Delhi: India’s packaged consumer goods companies reported their best quarter in a year as smaller packs, lower grammage, and price hikes helped them overcome a consumption slowdown that has weighed heavily on the sector in recent months.
Demand for packaged consumer goods in the December quarter spiked 10.6% year-on-year in value terms, faster than the corresponding year-ago period’s 6.5% growth, market researcher NielsenIQ India said in its FMCG quarterly snapshot.
The fast-moving consumer goods (FMCG) sector’s recovery is more striking against the July-September period’s 5.6% value growth and the June quarter’s tepid 3.5% pace.
In volume terms, India’s FMCG sector reported a 7.1% year-on-year jump for the December quarter, against the year-ago quarter’s 6.4% pace, with consumers opting for smaller packs during the festive season as prices of daily staples remained high. Volume growth was 3.9% in the preceding September quarter. NIQ follows a calendar year.
Demand for consumer goods in urban markets, however, remained slower than that in rural areas, although volume growth improved to 5% in the December quarter from 2.6% in the preceding three months. Rural volume growth improved sequentially to 9.9% from 5.7%.
“For the first time in four quarters, we have observed a combination of consumption and pricing driving overall FMCG growth,” said Roosevelt Dsouza, head of customer success, FMCG, NielsenIQ India. “Additionally, smaller, affordable packs from small and medium manufacturers are boosting consumption. Despite a slowdown in the top eight metros, e-commerce continues to disrupt buying behaviour.”
The urban slump
NIQ’s latest figures follow recent weak commentary from consumer goods companies, which cited moderating urban consumption in the December quarter due to high food inflation and tepid real wage growth.
Last month, consumer goods major Hindustan Unilever Ltd reported flat volume growth for the December quarter due to moderating urban demand. It also reported a trend of consumers switching to smaller packs of soaps, shampoos and detergents.
HUL reported flat volume growth for the December quarter and signaled a clear consumer shift towards smaller packs. “It’s quite a clear trend that urban demand has been moderating for the last few quarters and rural has been growing and gradually recovering,” CEO and managing director Rohit Jawa said during a virtual call with mediapersons.
Dabur India Ltd, meanwhile, expects sequential improvement in demand over the next few months on the back of an increase in infrastructure investments, good harvest, and the government’s Budget initiatives to spur growth.
“The quarter presented a challenging operating environment marked by unfavourable weather conditions and a slowdown in consumption,” Dabur India chief executive officer Mohit Malhotra said during the company’s post earnings call last week.
“India experienced delayed and contracted winters with October and November being the warmest in many years,” he added. “While urban demand showed signs of moderation, the rural market remained resilient. The rural has outperformed urban for the fourth consecutive quarter. Organized trade channels such as e-commerce, quick commerce and modern trades continue to deliver robust growth for us.”
Mayank Shah, vice president, Parle Products, added that while rural demand has been strong urban growth “is still half of rural and that continues to remain an ongoing concern”.
“Rural demand has been consistently improving prior to Diwali… on account of a good monsoon and kharif crop,” Shah said. “But if you see urban markets, several macro indicators point to a distress in demand—such as rising costs of equated monthly installments and high food inflation. However, do expect urban demand to improve in the coming two quarters.”
Small but big
NIQ in its report pointed out that smaller, affordable packs from small and medium manufacturers were boosting consumption.
Small manufacturers continued to grow faster than larger players during the December quarter, led by volume growth in categories such as food and home and personal care categories. That said, “while the giants are seeing slower value growth, they are still growing at twice the rate compared to Q3’24”, NIQ pointed out.
Neighbourhood or so-called kirana stores continued to drive demand in the December quarter, with volumes jumping both year-on-year and sequentially. Traditional trade volumes grew 8.1%, compared to 3.9% growth last year, while modern trade volumes declined 1.1%.
During the December quarter, while volume growth for packaged foods stood at 7%, price growth in food was higher at 3.7%, per the NIQ report. Demand during the quarter was led by packaged foods such as wheat and edible oils that benefited from a packed festive season despite a surge in prices.
Foods reported a 7.1% jump in volumes; while volume for home and personal care products was up 7.3% in the December quarter.
“Food consumption growth rose to 7% in Q4 ‘24, up from 3.4% in Q3’24, driven by increased volume in staple categories such as edible oils, palm oil, and packaged atta, despite price hikes,” NIQ said. “Health and personal care categories consumption growth saw an uptick, reaching 7.3% in Q4 ‘24 compared to 5.4% in Q3’24, with higher consumer demand observed in both urban and rural areas.”
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Business NewsIndustrySmall but big: FMCG records best quarter in a year amid consumption slowdown
First Published:6 Feb 2025, 12:26 PM IST
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