Lockdown: Nielsen slashes FMCG growth forecast by half to 5-6 pc for 2020

Market insight firm Nielsen has slashed the growth forecast for FMCG sector by almost half to 5 to 6 per cent for 2020, citing impact of coronavirus pandemic and subsequent lockdown.

Earlier, on January 21 , Nielsen had projected the FMCG industry's growth forecast of around 9 to 10 per cent for 2020, with a "stable" outlook on the back of favourable several macroeconomic factors.

Revising its outlook, Nielsen - which follows January to December calendar - said the sector will have to face several macro-economic challenges such as lower GDP growth rate, rise in number of unemployment besides impact of the pandemic.

"Given the significant headwind built in the start of COVID-19 pandemic in March'20, Nielsen revises the Full Year Industry growth forecast for 2020 to mid single digits (5-6 per cent)," the firm said in a report.

FMCG growth for Q1 20 (January-March) stands at 6.3 per cent against the Nielsen forecast of 8-9 per cent, and this quarter is turning out to be the lowest first quarter in the past three years, it added.

Going forward, Nielsen said, "We expect FMCG industry growth for the second half (July-December) of 2020 to be in the range of 5-6 per cent, marginally higher than H1 2020".

According to Nielsen, the FMCG sector witnessed an average growth of 7.5 per cent in January and February, however, March was impacted due to uncertainties around COVID-19 and subsequent lockdown.

In March, volumes grew by a mere 0.5 per cent, while the sector clocked value growth of 4 per cent.

While in the first quarter, 6.3 per cent growth of FMCG, traditional channels as kirana and neighbourhood stores had 3.3 per cent growth, while the modern trade and e-commerce had contributed 1.9 per cent and 1.1 per cent growth, respectively.

In the corresponding quarter in 2019, FMCG sector has reported 13.8 per cent growth in which 12 per cent growth was from the traditional channels, and modern trade and e-commerce had contributed only 1.2 per cent and 0.6 per cent.

More drastic changes were observed in the metro markets, where out of 7.4 per cent growth in January-March, tradition channel contributed only 0.4 per cent. Share of modern trade and ecommerce channels has gone up to 4.2 per cent and 2.8 per cent, respectively.