FMCG production growth fell to less than half; but, these items beat slowdown

By: |
December 20, 2019 5:20 PM

Production growth of FMCG items has declined over a year as economic slowdown takes a toll on the industry; now it is down to more than half of what it was last fiscal.

Out of 36 FMCG items taken into consideration for the report, production and demand of 14 products witnessed a hike. (Image: Bloomberg)

Production growth of FMCG items has declined over a year as economic slowdown takes a toll on the industry. Down to more than half of what it was last fiscal, “the production of consumer non-durables moderated to 4% in FY19 over the 10.5% growth in the preceding year. Subdued economic growth hence has weighed on the demand/production of these goods,” CARE Ratings said in a report on Friday. Adding to the woes of the fast-moving consumer goods industry is low increase in rural and urban incomes and limited traction in employment, the report added. The industry has been reeling under sluggish demand for close to a year now with major players such as HUL, Marico, Nestle, ITC, Parle etc acknowledging slowdown. 

Items which defied slowdown

Out of 36 FMCG items taken into consideration for the report, production and demand of 14 products witnessed a hike. This includes hair shampoo, ice cream, cookies and biscuits, chocolates, coffee, tea, among others. “It is to be noted that an increase in demand/production of these items was accompanied by moderation in inflation in these products. So, one can infer that lower inflation in these products led to higher demand and thereby production,” CARE Ratings said, adding that there could be other factors affecting the demand of these items as well. For example, the demand for hair products went up due to higher standard of living and increased focus on hygiene and grooming.

These items were most hit

On the other hand, demand and production of 22 products such as detergent, aerated drinks, hair oil, creams, soap, juice, toothpaste, butter, cakes, sauces etc went down. These items witnessed fall in demand despite lower inflation in the period taken into consideration. “One can come to a conclusion that price levels alone do not determine the production/demand of any product,” CARE Ratings said. In fact, income levels are not the only driving factor behind demand of FMCG products. “Factors including price of the good, perceived quality and changes in tastes and preferences also drive the demand and thereby production of any product,” the report said.

Meanwhile, fast-moving consumer goods are the most sold items on online platforms and every one in two items purchased via e-commerce belongs to the FMCG category, a Nielsen report said on Thursday. On e-commerce platforms such as Amazon, Flipkart, Snapdeal and others, the maximum volume of orders are for FMCG products at 56%. 

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