Consumer packaged goods sector may grow at up to 10% this year1 min read . Updated: 21 Jan 2020, 10:50 PM IST
- Nielsen expects inflation, which shot up to 7.3% in December primarily due to higher food prices, to decline in 2020
- In 2019, the sector grew 9.7% by value, due to weak quarterly growth rates in rural India
NEW DELHI : Market researcher Nielsen India on Tuesday maintained its annual growth outlook for India’s fast-moving consumer goods (FMCG) sector, which is reeling under a demand slump in both rural and urban markets, to 9-10% for 2020. In 2019, the sector grew 9.7% by value, due to weak quarterly growth rates in rural India.
“Full year 2020—we expect it to be stable and similar as compared to 2019—it will not dip further, that’s where we expect full year to land," Nitya Bhalla, lead, data science, Nielsen South Asia, told reporters. “We are starting to see early signs of stability with the slowdown being arrested."
Nielsen expects inflation, which shot up to 7.3% in December primarily due to higher food prices, to decline in 2020.
“Inflation in December’19 reached a 5-year high at 7.3%. It is expected to end in the 4-5% range for this year," Nielsen said in the eighth edition of the quarterly FMCG Snapshot.
The sector has been facing headwinds over the last few quarters, including rural job losses and stagnating wages besides an erratic monsoon, which led to consumers in India’s hinterland drastically cutting back on their monthly household expenses. This has dragged volume growth for consumer goods companies such as Hindustan Unilever, Godrej Consumer Products and Marico, among others.
In the fourth quarter, the FMCG industry grew at 7.3%, a sharp drop from the high double-digit growth it registered in the year-ago period. Demand was especially sluggish with urban India registering 7.4% growth in Q4, down from 14% in the year-ago period. In Q4, rural markets grew by 5.2%, down from 18% in December 2018.
In fact, things are likely to get worse before they get better, as Nielsen forecasts growth of 8-9% in the first quarter of 2020—the slowest first quarter in the last three years.
Nielsen’s roundup for 2019 paints a gloomy picture for the year. Prasun Basu, South Asia Zone president, Nielsen Global Connect, however, said 2020 offers a stable outlook for the industry, arresting the 2019 decline. “There is a good chance that rural has bottomed out," said Basu.
In a separate estimate, rating firm Crisil said an expected recovery in rural demand, coupled with steady urban demand, is set to lift the revenue growth of the FMCG sector to 10-11% in fiscal 2021. This, the report said, is similar to the levels witnessed in FY19.