India's FMCG sector grows at 6% in Q4; volumes contract on low consumption

The overall volume degrowth in India's FMCG sector was spread across categories, but the extent was significantly higher in non-food compared to food

India’s fast-moving consumer goods (FMCG) market grew 6 per cent in the January-March quarter over last year led by double-digit price growth, according to Nielsen IQ’s report.  

However, the sector’s volume stood at -4.1 per cent compared to last year due to a decline in consumption across all zones and town classes. 

“A decline in consumption is echoed across all zones and the town classes, but more prominent in rural markets, which saw a 5.3 per cent dip – the highest consumption slowdown in the last three quarters. The south and north zones witnessed more than 5 per cent volume decline,” Nielsen IQ said in its release. 

The report also said that rural markets witnessed higher price increases than urban markets (11.9 per cent in rural compared with 8.8 per cent in urban in the quarter) in the country. This caused more stress on consumption.

The overall volume degrowth was spread across categories, but the extent was significantly higher in non-food compared to food. The non-food category volumes stood at -9.6 per cent and the foods category saw a decline of -1.8 per cent in the quarter. 

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

The report also noted that there is a 5.3 per cent increase in the exit of small manufacturers in the quarter ended march due to high input cost pressures, and not being able to pass on the costs to the consumers. 

“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”, Satish Pillai, managing director India, NielsenIQ said in the release.

He added, “Although global macro factors persist, the impetus by the government if supported by the normal monsoon in the country, would be encouraging. Within this environment, retail trade continues to be optimistic, and traditional trade shopkeepers have maintained stock levels, as well as assortment.”

Modern trade witnessed stabilisation in recent quarters, with volume growth increasing by 5.3 per cent and traditional trade saw degrowth of –4.9 per cent in volumes led by a shift towards smaller packs in the January-March quarter. E-commerce grew at 5.6 per cent in value compared to last year. 

“Consumers are 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. Keeping this in mind, manufacturers and retailers need to ensure the right assortment of pack sizes across brands to account for this consumption shift”, said Sonika Gupta, customer success lead (India), NielsenIQ said in the release.