The local fast-moving consumer goods (FMCG) market grew six per cent by volume in July, triggering hope of a revival in the sector that was struggling to grow. Data from consumer analytics firm Kantar Worldpanel, show that recent growth was aided by 12 per cent expansion of the rural FMCG market and seven per cent growth in overall foods and beverages
(F&B) category. A detailed analysis of historical data, however, reveals that a low base may have played a key role in the recent uptick in the sale of chips, biscuits, shampoos, and soaps.
Between 2012 and 2016, overall F&B sales grew at a dismal 2.15 per cent CAGR. A category that possesses immense potential for growth given the fact that only two to three percent of food consumed in the country is processed, the poor growth in recent years have been a major setback for the FMCG companies.
Penetration of F&B items remains low in rural areas, which houses nearly 69 percent of the country’s population. However, F&B market in rural India inched up only by 1.87 per cent CAGR during the four-year window.
While in July 2017, rural FMCG market expanded by impressive 12 per cent. During the July-September quarter between 2012 and 2016, the rural FMCG market grew by meager 2.35 percent CAGR.
Overall FMCG market, including rural and urban areas of the country, grew six per cent in volume in the month of July. However, the growth rate for the same between July-September 2012 and 2016, was 2.45 per cent CAGR. Given the poor growth rates in recent years, the effect of a lower base cannot be ruled out, experts said.
Traditionally, the July-September period is a slow growing one for the sector as the advent of monsoon and focus on agricultural activities among rural households, limits the growth of most FMCG firms. The poor road conditions also deter any massive initiative in the hinterlands.
However, very low inventory at the trade level this year – thanks to substantial destocking during June and postponement of orders before July 1 implementation of the goods and services tax (GST) by distributors, dealers, wholesalers, and retailers – sales picked up by mid-July.