Amid rising gloom, better alcohol sales buck weak consumption trend

More than 90% of the shopkeepers said footfalls were lower in Diwali compared to last year and there were also empty shelves and early store closures despite the festive season

Tipplers defied the broader trend this Diwali by helping steady the faltering consumption story to an extent, at a time when all the other segments have shown weakening demand, says foreign brokerage report.

The segment closest to alcohol, when it comes to sales during the just concluded Diwali festive season, when marketers snap up over 40 per cent of their annual sales, has been the marketers of premium products, who are "satisfied" with the volume, according to a report by the equities analysts at Bank of America Merrill Lynch.

It can be noted that the economic growth has slipped to a six-year low primarily due to steeply falling consumption demand, and policymakers have been taking massive efforts to push up growth by prodding the public to spend more.

 

And many reports suggest, based on incoming data on IPP, and core sector growth along with exports, that the trouble is getting bigger and the Q2 growth will be lower than the 5 percent notched up in Q1.

"Alcohol sales seem to have bucked the weak trend--at least in our checks," the BofA-ML analysts said in a report on Tuesday without quantifying the same. Their assessment is based on their visits and interactions with 120 shopkeepers in the financial capital in the week leading to Diwali.

The feedback has not been "encouraging", as "majority of retailers reported weak festive sales with little hope or visibility of improvement", they add.

These trends confirm the weak macro data, and suggest that some consumer companies will have to reduce their elevated inventories and there can also be a miss in earning targets in some pockets.

More than 90 per cent of the shopkeepers said footfalls were lower in Diwali compared to last year and there were also empty shelves and early store closures despite the festive season, notes the report.

Shopkeepers blamed the Assembly polls in Maharashtra and Haryana, Diwali falling in the last week of the month which impacts salaried people, lower credit periods from suppliers, diminishing corporate gifting, extended rains and also a shift to online shopping for their woes, the report concludes.