Not only rural, urban FMCG sales also slipped late last year: Bizom

The research agency said that urban growth was down 2.1 per cent in the quarter ended December compared to the same quarter last year, and the same was down 0.5 per cent in the previous month

Sales of fast-moving consumer goods (FMCG) in value terms faltered in the October-December quarter of 2023, with even urban sales showing a decline, according to data from retail intelligence firm Bizom. 

FMCG sales in urban areas contracted 2.1 per cent year-on-year (Y-o-Y) in the quarter ended December 2023; the same was down 0.5 per cent Y-o-Y for the month. 

Overall, FMCG sales were down 4.5 per cent in October-December and 2.2 per cent in the final month of 2023, the research agency reported.
 

During a recent investor call, Rohit Jawa, managing director and chief executive officer of Hindustan Unilever, noted that urban growth continues to outpace rural. “Urban markets grew 3 per cent on a two-year basis, while rural ones grew 1 per cent in the same period,” he said. Other FMCG companies, too, highlighted in their quarterly updates that rural demand continued to lag in the October-December quarter.

 

But, Akshay D’Souza, Bizom’s chief of growth and insights, told Business Standard: “Stocks in urban areas are not moving after the festival season.”

He further explained: "FMCG sales in 2023 witnessed rural (markets) lagging in the most recent quarter, which impacted overall sales value growth of FMCG for the year. From high growth at the start of the year, we saw a cautious end after the festival season.”

In 2023, urban FMCG sales growth was almost flat at 0.4 per cent; rural sales were up 2.3 per cent and total FMCG market uptick was 2 per cent.

D’Souza attributed this tepid growth to several factors, including a sharp drop in the prices of edible oils impacting value growth, a cooler summer affecting beverage sales, and erratic rainfall during the monsoon. “Monsoon and cooler summers have impacted growth in rural areas as we see consumers still buying conservatively,” D’Souza said. 

He explained that the challenges of food inflation were tempered down in 2023 vis à vis 2022, fuelled by a sharp Y-o-Y decrease in the prices of edible oils. This led to a drop in sales value growth of products in commodities, given that edible oils weigh heavily on this category.

D’Souza pointed out that the period of March-June, which typically accounts for half the sales for beverage products, was impacted due to a cooler-than-usual summer in 2023. This came after record-high temperatures in 2022. “That saw sales value growth impacted for beverages this year. While the distribution of these products grew Y-o-Y, we did see that stocking in kiranas for beverage products dropped due to lower consumption,” D’Souza said.

In Bizom’s outlook, D’Souza noted that rural consumers continue to spend less on discretionary products and focus more on “need” products. This has led to companies lowering prices across many discretionary products, such as shampoo, hair colour, and body spray, as manufacturers are looking to spur consumption of these products.

“Going forward, we expect prices of key essentials like rice, wheat, sugar, and edible oils to maintain and start trending lower, driven by strong supply availability in the Indian market. This will definitely trigger spending for other discretionary products, too. With a stable economy and controlled inflation, we should see a spurt in consumption as we also build up to the upcoming general elections. This could definitely see FMCG move to a higher growth orbit early on in 2024,” D’Souza added.