India’s fast-moving consumer goods (FMCG) market reported a 9% year-on-year jump in September 2023 quarter sales and an 8.6% rise in volumes for the period, market research agency NielsenIQ (NIQ), said on Tuesday, led by urban markets. Rural markets, despite showing indications of progress, still have a long way to go before fully recovering, according to the market research firm in its quarterly market analysis.
A closer look at the data shows that the overall FMCG value growth for the three months ended September 2023 has slowed when compared to the March 2023 quarter (10.2%) and June quarter (12.2%) each, thanks in part to a flat price-led growth (0.3%) reported during the period. In the March and June 2023 quarters, price growth was 6.9% and 4.4% each for the sector. Volume growth has increased from 3.1% in the March quarter to 7.5% in the June quarter.
NielsenIQ says that moderating commodity inflation has led home and personal care (HPC) companies to cut product prices in the September quarter in categories such as soaps, detergents and hair oils. While food companies (such as Britannia in biscuits) undertook price cuts during the quarter under review to shore up volume growth.
“The FMCG industry has witnessed a further reduction in price growth from the last quarter. Cooling of inflation in the country fueled by base effects; a recent decline in unemployment figures and liquified petroleum gas (LPG) prices amongst other factors have contributed to the willingness of consumers to spend,” Satish Pillai, MD, NIQ India, said.
While overall rural volume growth for the September quarter stands at 6.4% versus 10.2% reported in urban areas, non-food companies, NielsenIQ says, are tracking better in terms of rural volumes versus food companies.
Some sector analysts say that this has more to do with the aggressiveness of small and regional players in the non-food market, which has helped shore up rural volume growth in that segment.
“The rural consumer is price-sensitive and has been switching to cheaper alternatives, following a resurgence of small brands over the last two-quarters of FY24,” says Sachin Bobade, vice president, research at Mumbai-based brokerage Dolat Capital, corroborating what FMCG major Hindustan Unilever has been saying for the last two quarters.
NielsenIQ data shows that rural volume growth within the non-food category stands at 6.7% in the September quarter versus 1.4% reported in the June quarter and a decline of 3.9% seen in the March quarter.
Rural volume growth within the food segment, on the other hand, stood at 6.5% in the September quarter versus 5.3% reported in the June quarter and 2.2% seen in the March quarter.
Smaller-sized packs are also having higher offtakes in rural areas, while in urban markets average pack sizes have turned positive, though there is a continued preference for larger packs, the research agency said.
Within the retail sector, modern trade is seeing strong double-digit volume growth at 19.5% in the September quarter versus 14.6% and 21.1% reported in the March and June quarters each. Volume growth in traditional trade is also on the rise, with consumption improving to 7.5% in the September quarter, versus 1.9% and 6.2% reported in the March and June quarters each.