FMCG sales decline in July as price increases bite

Experts attribute the fall partly to products having become costlier as companies persisted with price hikes even though input prices cooled off in June. The sharpest fall of 15.5% was seen in the personal care category, possibly due to some down-trading.

FMCG sales decline in July as price increases bite
Experts attribute the fall partly to products having become costlier as companies persisted with price hikes even though input prices cooled off in June. The sharpest fall of 15.5% was seen in the personal care category, possibly due to some down-trading.

By Shubhra Tandon & Kritika Arora

Sales of fast moving consumer goods (FMCG) declined by 3.7% in value terms, in the first fortnight of July, compared with a 6.4% growth recorded in the same period of June.

Experts attribute the fall partly to products having become costlier as companies persisted with price hikes even though input prices cooled off in June. The sharpest fall of 15.5% was seen in the personal care category, possibly due to some down-trading.

Akshay D’Souza, chief —growth and insights — at Bizom said that even though there was a 6.4% growth in FMCG sales in the first two weeks of June versus May, for June as a whole, they were flat at about 1%. “This indicates there was limited stock dumping during the month-end in June and that should help better stocking by kiranas in July,” he said.

Households are, however, consuming more food staples — commodities such as cooking oil — as seen in the 13% growth for the category. On the other hand, consumption of beverages has dropped by 42% with the monsoon setting in, according to data sourced from consumer data intelligence firm Bizom. All other categories — packaged foods, home care and confectionery — saw single digit declines.

The increase in the consumption of commodity products has been driven by the reduction in cooking oil prices, according to Sanjeev Asthana, CEO, Patanjali Foods, who said demand had seen a sudden collapse after the hike in prices.

“Pipelines were empty because people were not buying due to higher prices. But now the demand has started to pick up gradually, largely for edible oils,” Asthana said.

Piruz Khambatta, chairman and managing director, Rasna, told FE that traditionally, beverage sales taper off in July with the onset of the monsoon. “This is a seasonality factor as we move from peak summer to monsoon. Sales should pick up again in the festive season and our estimate is we should see at least 20% growth this time around,” Khambatta said.

The decline in prices of palm oil, as also commodity prices, may prompt companies to drop prices of products which use them as key input ingredients. However, for now, the pressure continues with all categories witnessing single to double digit declines. Price hikes across categories have continued unabated during the month of June with prices of soaps, detergents, toothpaste and shampoo on the rise.

According to Asthana, demand for FMCG products has also been reasonably good. “The drop in commodity prices should be supportive to those categories. We should see a pick-up in demand closer to the festive month,” he said.

Between April and June, companies have raised prices of a host of products. According to Kotak Institutional Equities (KIE), Hindustan Unilever (HUL) raised prices of its soaps by 3-20% across brands while ITC increased the price of select stock-keeping units of Fiama Di Wills by 21%. Prices of soaps from Godrej Consumer Products Limited (GCPL), Reckitt Benckiser, and Wipro Consumer have also increased in the range of 4-19% during June versus April.

Detergents saw high single-digit price increase across brands. HUL raised prices of select SKUs of Rin bars by 8-20% and Rin and Surf Excel detergent powders and liquids by 2-8% while P&G increased prices of its Tide and Ariel detergent powders by 3-7%. Similarly, HUL increased price of Vim and Jyothy Labs of Exo by 7% and 8%, respectively in the dish wash bars.

In toothpastes, Colgate raised prices of select SKUs by 5-14% while Dabur increased prices of its toothpastes by 3-7%. In shampoos, P&G increased prices of Head & Shoulders and Pantene by about 6-9% while HUL raised prices of Sunsilk and Tresemme by about 3-6%. HUL has also increased the price of select SKUs of Glow & Lovely by 7%.

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