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Business News/ Industry / Retail/  FMCG sector to grow 4-5% in 2020: Kantar
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FMCG sector to grow 4-5% in 2020: Kantar

Rural markets will grow slightly more than urban areas this year as a steady monsoon, reverse migration, and benefits flowing from rural employment schemes will aid spends
  • Covid prompted households to buy more during every trip to the grocery store even as they reduced their frequency of trips
  • Kantar studied consumer and household behavior in India in 2019, while also combining growth in consumption of packaged goods in India amid the covid-19 induced lockdown during March to May (Pradeep Gaur/Mint)Premium
    Kantar studied consumer and household behavior in India in 2019, while also combining growth in consumption of packaged goods in India amid the covid-19 induced lockdown during March to May (Pradeep Gaur/Mint)

    New Delhi: India's fast moving consumer goods sector could end the year with a 4-5% growth in volumes, despite covid-19 led disruptions to supplies and household incomes, as consumers stocked up on basic goods such as health, hygiene and packaged food products while cutting down on purchase of grooming and other discretionary personal care items, researcher Kantar said.

    Rural markets will grow slightly more than urban areas this year as a steady monsoon, reverse migration, and benefits flowing in from the rural employment schemes will aid spends on soaps, floor cleaners and milk-biscuits, K Ramakrishnan, managing director, Kantar Wordlpanel said on Friday.

    Kantar studied consumer and household behavior in India in 2019, while also combining growth in consumption of packaged goods in India amidst the covid-19 induced lockdown during March to May.

    Covid-19 prompted households to buy more during every trip to the grocery store even as they reduced their frequency of trips. In all, FMCG spends were up 4.3% between March and May to 3,734 compared to the year ago period. Frequency of trips to grocery stores reduced in the same period from 34.3 to 30.5.

    Kantar tracks consumption at a household level and covers both branded and unbranded households goods in over 90 FMCG categories.

    “We will probably end the year with anywhere around 4-5% growth, largely driven by growth in packaged foods, and health and hygiene products. Value growth will also be similar, not very different," Ramakrishnan said.

    Rural markets could grow 2 percentage points ahead of urban, beating urban growth rates after a gap of a few quarters, Ramakrishnan said. Rural markets account for 36% of the total FMCG spends.

    Panic buying in the initial phase of India's lockdown in late March that saw Indians spend disproportionately on staples, instant noodles, biscuits, soaps, toilet cleaners and sanitizers, drove 4% volume growth for packaged consumer goods market between March and May in urban India.

    Categories such as personal care and household care grew at 13% and 6% respectively, in urban areas, while consumption of beverages—that rely largely on out of home channels—slumped by 25% in urban markets.

    Growth in rural India, was a shade lower at 3% between March to May. Household in India's hinterland bought more milk biscuits, fairness creams, health food drinks, toilet and utensil cleaners.

    Consumers stuck at home, largely stocked up in the initial phase of the lockdown, buying into whatever brands were available across key categories of staples, health and hygiene snacks. Households in rural markets too bought more toilet and utensil cleaners, using local brands in the process and helping increase the rural penetration of these categories.

    Covid has also helped accelerate growth of categories such as surface cleaners and anti-bacterial soaps.

    India’s hygiene market is estimated at 38,319 crore as of February 2020—this includes toilet & bathroom cleaners, skin cleansing, floor cleaners, sanitizers. Between March to May, the category registered an encouraging 24% growth year-on-year.

    Kantar estimates that nearly 350 new sanitizers brands entered the market—giving muscle to a category that has largely remained peripheral for several years.

    In fact, Kantar estimates that the penetration of hand washes jumped too, as an average of 2.70 lakh households entered the category per week in the last 14 weeks. Sanitizer, on the other hand, on an average added 2 lakh households weekly in the last 14 weeks.

    Pre-covid, sanitizer penetration in India was estimated at 1.5%, covid has now helped hurtle sanitizer reach to more households and offices.

    Purchase of grooming products -- creams, hair oils, hair colour, beverages -- has visibly reduced.

    This led to a significant loss of households that avoided buying these categories since people were are at home, it eliminated their need for grooming, Ramakrishnan added.

    However, packaged foods, led by noodles and cookies, had a strong run between March and May as consumers drove in-home consumption of snacking.

    “More than staples, the bigger growth has come from convenience foods and snacks—instant noodles, breakfast cereals, squashes. Noodles grew in the excess of 30% in the months between March-May compared to a year ago. Snacking went through the roof, biscuits registered nearly a 45% growth in urban India—during this period. Hand wash and soaps we have seen big growths too," Ramakrishnan said.

    The trends were corroborated by some of the country’s top FMCG companies.

    In their June quarter updates earlier this month, packaged consumer goods companies Marico Ltd and Godrej Consumer Products Ltd., whose portfolios span cooking oil to hair color observed similar trends.

    Marico's portfolio of Saffola cooking oil benefitted with consumers cooking more at home; while its oats business too had a "good run", the company said in a filing to the exchanges on 3 July.

    GCPL said its household insecticide category witnessed strong consumer demand. The same wasn't true for its hair color brands that hold a dominant position in the market.

    Britannia Industries said its biscuits sales were up significantly in April and May.

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    ABOUT THE AUTHOR
    Suneera Tandon
    Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
    Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
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    Published: 10 Jul 2020, 04:57 PM IST
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