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Inflationary pressures hurting smaller FMCG players: report

Consumers, feeling the pinch of higher prices of everything from soaps to detergents and packaged foods, have been moving to cheaper priced products or switching to unbranded goods. (Photo: Reuters)Premium
Consumers, feeling the pinch of higher prices of everything from soaps to detergents and packaged foods, have been moving to cheaper priced products or switching to unbranded goods. (Photo: Reuters)

  • Over recent months, input cost pressure has forced manufacturers to increase prices especially of food products and cooking medium. This had a severe impact on small manufacturers in the September quarter, leading to 14% of them churning out of the market versus a year ago

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NEW DELHI: Burdened by increased cost pressures, nearly 14% of local manufactures of fast-moving consumer goods exited the market in the September quarter, data by market researcher Nielsen IQ suggests.

Consumers, feeling the pinch of higher prices of everything from soaps to detergents and packaged foods, have been moving to cheaper priced products or switching to unbranded goods.

As a result, manufacturers selling products in the mass-priced segment are feeling the loss. Consumers, said Nielsen’s research, were dropping out of both premium and mass-priced segments.

“Over the recent months, input cost pressure has forced manufacturers to increase prices especially of food products and cooking medium. This had a severe impact on small manufacturers in the September quarter, leading to 14% of them churning out of the market versus a year ago," said Sameer Shukla, customer success lead for NielsenIQ South Asia.

For instance, popular price segments, across FMCG industry saw an uptick in contribution 59% in the September quarter of the ongoing year compared to 56% contribution it saw in Q1 2020. Meanwhile, mass price segments saw a drop in value contribution over last quarter.

"In the September quarter we saw that several smaller manufacturers found it very difficult to sustain because they have a higher play on the mass market products. People are moving out of that category and there is pressure there," said Shukla. 

This was especially true in rural markets where households, strapped for cash, cut down on their budgets for monthly groceries. Interestingly, such smaller manufactures have a larger salience in rural markets.

Out of the total value growth reported by the FMCG industry in September quarter, versus year ago, 76% contribution came from large manufacturers, while the small players had just 2%, the rest coming from mid-size players, the researcher said.

Earlier this week, NielsenIQ said demand for packaged consumer goods in India’s villages dwindled in the September quarter as consumers bought less of or purchased cheaper cooking oil, packaged grocery, hot beverages and personal care products, pulling down overall industry volumes for the fast-moving consumer goods (FMCG) market. 

Nielsen pointed to a “slowdown" in rural markets that reported 9.4% value growth but saw volumes decline 2.9% year-on-year.

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