Fmcg industry sees consumption drop 2.6% amid rising prices, with rural markets hardest hit


Inflation has been the theme of the fast-moving consumer goods sector in recent quarters thanks to soaring commodity prices. While FMCG companies such as Hindustan Unilever, Britannia, ITC among others have flagged the problem of inflation and its impact on consumption, a recent report by consumer analytics firm NielsenIQ showed that consumption took a hit, having fallen 2.6% in the October to December Quarter of 2021. This, according to Nielsen, is due to inflationary pressures and other macro factors in the country.

While consumption points to volume growth, the FMCG industry saw value (price-driven) growth of 9.6% in the quarter, driven by double-digit price increases for three successive quarters . Nearly every FMCG company, from HUL to Britannia, ITC and Parle, raised commodity prices across all categories. Prices for soaps, detergents, pulses, packaged foods and even cookies have risen in recent quarters.

While large and medium-sized FMCG manufacturers remained flat throughout the year, rising costs had a massive impact on smaller manufacturers. According to NielsenIQ, the number of small manufacturers (with a turnover of less than Rs 100 crore) fell by 13%, due to the difficulty of continuing operations with higher costs.

Rural markets have been most affected by the inflationary environment. Consumption (growth in volume) decreased by 4.8% in rural India, while it recorded a growth in value of 8.9%. “Categories like basics or over-the-counter products have seen sharp price increases over the past two quarters, leading to greater price growth in rural markets and therefore impacting volumes” , NielsenIQ said in its FMCG Snapshot Report for the quarter.

In fact, rural consumers are now starting to buy smaller packages again to counter price increases. Urban markets also saw a drop in consumption (albeit marginal) of 0.8%. This decline was also reflected in trade channels with traditional trade, which is the kirana and family stores saw their volumes decline by 4.8% in both rural and urban areas. Modern retail, however, saw volume growth of 5.6%, thanks to higher promotions and larger packaging.

And now, with the Ukraine-Russia crisis pushing commodity prices even higher, inflationary pressures and therefore price increases are also likely to continue in the coming quarters.

On the other hand, FMCG penetration among online shoppers increased from 15% pre-pandemic to 25-30% during the pandemic and also remained at 25% post-pandemic. Interestingly, NielsenIQ indicates that in the overall retail outlet universe, a structural shift is also evident in channel types, where there has been a shift in store pick-ups based on location, an increase specialty stores that stock FMCG products and an increase in e-commerce. This is also evident in the fact that FMCG majors are now considering more digital launches while experimenting with new products.

First post: STI


cnbctv18-forexlive-benzinga

Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.
Back to top button