Analysts flag postponement of discretionary consumption

  • Some consumption categories that were impacted due to prolonged stay-at-home last year could see a further delay in recovery.
  • These include personal care products such as hair oil, fairness cream, apart from detergents that are likely to see slow off-take, according to a report by ICICI Securities.

Staff Writer
First Published4 Apr 2021
The retail sector seems to be recovering from demonetisation and GST, as visible in the second quarter results of the leading FMCG firms. Photo: Indranil Bhoumik/Mint
The retail sector seems to be recovering from demonetisation and GST, as visible in the second quarter results of the leading FMCG firms. Photo: Indranil Bhoumik/Mint

As India continues to report a surge in covid-19 cases, some consumption categories that were impacted due to prolonged stay-at-home last year could see a further delay in recovery.

Within the fast-moving consumer goods sector, these include personal care products such as hair oil, fairness cream, apart from detergents that are likely to see slow off-take, according to a report by analysts as ICICI Securities that mapped the long- and short-term impact of covid on demand for consumer goods.

“Personal care products (categories like hair oil, fairness cream etc.) and detergent category recovery may potentially be delayed (if there is a strict lockdown) in the near-term as usage is significantly linked to consumers moving out of their homes. For example, a certain set of consumers use fairness creams with a sunscreen objective and consumers staying at home likely reduces usage,” they said in a report recently.

Fast-moving consumer goods companies saw a mixed response in 2020. Demand for products such as packaged foods, hygiene products, and cleaners remained largely intact; meanwhile, some out-of-home consumption categories such as beverages and personal care products were hit hard.

For the full year 2020, sales of FMCG were down 2% compared to the year-ago period. The sector fared well when compared to other consumption-linked sectors such as retail and restaurants.

Talking about the short-term challenges that consumer goods companies could possibly face, analysts at ICICI Securities also pointed to a postponement of spends on other discretionary products.

“Retailers and QSR players are likely to be impacted due to curtailed working hours even with lesser strict lockdowns (night curfew, weekend lockdowns) and higher social distancing norms. This could delay the recovery path for some of the discretionary companies. However, we believe the delivery segment of QSR players will not be impacted and will continue to grow, offsetting some of the pressure in dine-in business,” according to the report.

A surge in cases is likely to impact footfalls in stores while giving a boost to online ordering across food and other categories.

Several cities are now reporting a significantly higher number of cases, raising concerns of stricter measures being announced. Maharashtra has already imposed a night curfew. Within the state, Pune directed malls, bars, and restaurants (for dine-in) to be shut for seven days.

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