The Rs 5-trillion domestic fast-moving consumer goods (FMCG) market still faces hurdles on its path to complete recovery from the current slowdown, conversations with industry executives and sector analysts indicate. This is despite a bullish picture that market research agency NielsenIQ, which tracks branded retail sales in FMCG, has presented for the March 2024 quarter.
Data sourced from the industry, NielsenIQ has pointed to a rural recovery in the three-month period between December 2023 and February 2024, saying that rural markets have outperformed urban markets by 150-200 basis points in terms of volume growth. However, figures for the month of March 2024 have not yet been released.
Industry executives and analysts say this growth is coming on a low base and due to price cuts initiated by companies in the March quarter thanks to benign commodity costs during the period. Some experts believe that with commodity costs turning inflationary in recent months, FMCG companies may have to carefully navigate the price-to-volume equation in the coming quarters to avoid hurting their margins, even as they look to shore up overall sales growth.
“Demand trends have remained sluggish during the March quarter. Rural growth picked up fueled by price rollbacks in staples which led to the gap between rural and urban narrowing,” Dabur India said in its March quarter update last week. The company said that it expected consumer demand to improve in the quarters ahead as macroeconomic indicators were robust.
Godrej Consumer (GCPL), too, had pointed to subdued operating conditions within the FMCG market in India in Q4, saying it expected mid-single-digit consolidated sales growth in Q4.
“Our channel checks suggest that rural is not out of the woods yet. Volume growth visible in rural areas is coming on a low base. This will take time to stabilise,” Sachin Bobade, vice president, research at Mumbai-based brokerage Dolat Capital, said.
Kantar, which tracks household consumption across 90 different categories and sub-categories, says the FMCG market will remain subdued till the September 2024 quarter, thanks to factors such as a global slowdown, minimal impact of the general elections on household consumption and growing weather uncertainty on farm output and incomes.
The research agency has also said that annual FMCG purchases (without atta) for a household have stagnated at 117 kg since 2021. This may not inch up significantly in 2024 as slowdown concerns will remain for most of the year, it said.
Bizom, which also tracks FMCG retail sales, is yet to disclose its March quarter numbers and outlook for the 2024 calendar year. In CY23, Bizom pointed to a sluggish 2% overall growth in FMCG sales, with urban sales slowing down sharply at 0.4% versus rural sales which grew 2.3% during the year.
“Urban and rural consumption are largely converging as demand sentiment has stayed consistent vis-a-vis preceding quarters,” Marico said in its Q4 quarterly update on Friday. Consolidated revenue growth in the March quarter would be in the low single digits, Marico said, with domestic revenue growth outpacing volume growth in the coming quarters.