Home / Industry / Retail /  FMCG volumes down 4.1% in March quarter, says report
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NEW DELHI: Volumes of goods sold by fast moving consumer goods companies fell 4.1% year-on-year in the March-ended, even as the industry reported a 6% year-on-year rise in value terms, driven by aggressive price increases undertaken, researcher NielsenIQ said in its quarterly snapshot on the sector released Wednesday.

Rural markets reported a 5.3% dip in volumes, the highest reported decline in the last three quarters, the researcher said. In urban centres, volumes declined 3.2%. Rural markets reported value growth of 6.6%, while urban markets grew 5.6% in value terms.

“A decline in consumption is echoed across all zones and the town classes, but more prominent in rural markets, which sees a 5.3% dip—the highest consumption slowdown in the last three quarters. The south and north zones witnessed more than 5% volume decline," it added.

Most large consumer goods companies flagged consumption slowdown in the March quarter which they said was driven by inflation hurting household budgets. This was also evident in higher demand for smaller or value packs and companies reporting softer volume growth.

Companies also undertook aggressive price hikes to counter high inflation. NielsenIQ’s research pointed out that rural markets witnessed higher price increases when compared to urban markets, with prices growing 11.9% year-on-year in rural pockets compared with 8.8% in urban markets during the March quarter. Bigger price hikes may have been taken on packs sold in rural India also in the form of reducing grammage.

This led to a greater consumption decline in India’s villages.

“In continuation from last year, macro-economic indicators are still guiding consumption patterns for the Indian consumer, and they are feeling the impact of the price increase especially in the food and essentials categories", said Satish Pillai, managing director, India, NielsenIQ.

Pillai said that while global macro-factors such as the war in Ukraine, that is driving up commodity inflation, persist any impetus by the government, if supported by a normal monsoon, would be encouraging for the industry.

Although the decline in volumes was spread across categories, it was more pronounced in the non-food categories as consumers prioritised spending on essential items.

For instance, packaged foods, which contribute 61% to FMCG sales by value, declined 1.8% year-on-year during the quarter. In contrast, volumes in non-food categories were down 9.6% in the same period.

“Within foods, impulse beats the slowdown with a positive volume growth of 1.5% with consumers focusing on smaller packs in the category seen in salty snacks, chocolates and confectionary. The staples product basket with categories such as refined and non-refined edible oil, vanaspati, packaged atta have shown a nearly 15% price increase," it said.

Meanwhile, sales via modern trade have stabilised in recent quarters, NielsenIQ said, with volume growth on the uptick. In the March quarter, FMCG volumes grew 5.3% via the trade channel. Traditional trade reported a 4.9% decline in volumes led by a shift towards smaller packs. E-commerce grew 5.6% on year.

Sonika Gupta, customer success lead (India), NielsenIQ, said consumers were seen scaling back more on discretionary spends within the non-food categories. “Overall, there is an evident shift by consumers to smaller pack sizes to manage external factors for both foods and non-foods," Gupta said.

Companies too reported similar trends in the March quarter.

Vatika oil maker Dabur India reported a “setback" in rural demand. “For us, in the past couple of quarters, our rural was always firing ahead of urban. However, what we found in this quarter is a liquidity crunch and demand compression in rural India. Therefore, our credit (cycle) has also gone up in rural India. Rural is the one which is not doing so well for us at the moment," the company’s chief executive Mohit Malhotra said during the quarterly earnings call held last month.

Mumbai-based Hindustan Unilever Ltd., reported flat volume growth in the March quarter.

“Due to unprecedented inflation, FMCG market value growth has significantly slowed down and volumes are declining in high single digit. The impact is more pronounced in rural, where even value growth has started declining. Consumers are tightening volumes and essentials are being prioritized over discretionary categories," the company’s management said during the March quarter earnings call held on 27 April.

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