Inflation, rural distress continue to hurt consumption in FMCG sector: Nielsen  | The Financial Express

Inflation, rural distress continue to hurt consumption in FMCG sector: Nielsen 

Consumption decline in rural markets was led by both double-digit price increases and lower unit growth

Inflation, rural distress continue to hurt consumption in FMCG sector: Nielsen 
Retail trade chose to keep lower stock levels to stay agile.

Declining rural volumes due to inflationary pressure and cautious consumption led to a slower growth of 8.9% for the fast-moving consumer goods (FMCG) industry in the July-September quarter.

According to the Nielsen IQ’s FMCG Snapshot for Q3 2022, rural volumes recorded a decline of -3.6% in the September quarter, which was higher than the -2.4% fall in the April-June quarter. Besides inflation, another factor that played an important role in the volume reduction was the variable rainfall across rural areas that led to a further softening of indicators.

At the same time, urban markets sustained a volume growth of 1.2%. Consumption decline in rural markets was led by both double-digit price increases and lower unit growth. Typically, there is a consumption uptick in the third quarter but this year despite the opening of markets, consumption has not grown,” Satish Pillai, managing director-India, Nielsen IQ, said, adding that this quarter shows cautious consumption from consumers due to apprehensions of slowdown and continued inflation.

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Consequently, the retail trade chose to keep lower stock levels to stay agile. “Manufacturers need to support the retail trade to alleviate this apprehension,” Pillai added. Meanwhile, modern trade showed a double-digit value as well as volume growth. In all, the FMCG industry witnessed its fourth quarter of fall in volume growth. In the September, it was -0.9%. Price growth, on the other hand, saw a double-digit growth for six quarters in a row. In the September and June quarters, prices grew 9.9% and 11.7%, respectively.

During the September quarter, the foods segment saw a positive volume growth in urban areas while witnessing a marginal fall in rural markets. Non-food consumption declined further in the quarter led by rural market.

Consumption was largely driven by smaller manufacturers with a positive volume growth of 0.5% in Q3 as lower price increases by small manufacturers compared with large/medium helped them drive a positive consumption growth. They are also gaining in both value and volume share in the last two-three quarters sequentially, Nielsen IQ said.

While new launches in Q3 were higher across key FMCG categories than a year ago, most were in terms of changes in pack size due to high raw material cost. “Manufacturers are taking different measures to rejig their pricing strategies to win back consumers. Some manufacturers are focusing on innovations in pack sizes, and many manufacturers have rejigged their price strategies to develop affordable price points for consumers,” said Sonika Gupta, customer success lead (India), Nielsen IQ.

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First published on: 11-11-2022 at 01:05 IST