By Kritika Arora
The fast moving consumer goods industry (FMCG) will return to double-digit growth in 2022 on the back of value growth, which is a combination of volume and price-led expansion and revival of some consumption, according to market research firm Nielsen’s projections. It has estimated the sector’s value growth at 8-10% for the year despite inflation running high.
“The first half of the year had an 8% value growth, which indicates an overall positive outlook for January-December 2022. The second half of the year will be driven by the festive season, and normal monsoon that will give the necessary push to consumption patterns for the sector,” said Rajesh S Shirali, data science market and client engagement lead, NielsenIQ India.
The FMCG sector grew at 10.9% in the April-June quarter against 6% in the preceding quarter. However, this growth was mainly price-led with 11.6% coming from increase in prices and -0.7% from volumes.
The volumes during the quarter, although negative, improved from –4.1% in January-March quarter to –0.7% in April-June, thus indicating consumption revival.
“This beats the last two quarters of consumption decline and highlights the onset of cautious optimism among consumers. Also, the consumption recovery and promising macro factors support NielsenIQ’s forecast of double-digit growth for 2022,” said Satish Pillai, managing director – India, NielsenIQ.
The overall consumption revival seen during the quarter is led by a jump in unit growth. While the average pack size has reduced, unit growth has bounced back to 8.9% this quarter from 1.5% in previous quarter, indicating that the consumers are buying smaller packs, but more units, Nielsen data said.
The consumption revival is led by the foods category, which saw positive volume growth of 1.8% in April-June with products such as chocolates, salty snacks growing by 15.1%, Nielsen said.
Second, there has been a revival in non-essential category, with personal care products like perfumed deodorants & cologne, skin creams, coconut oil, hair dyes, talcum powder seeing growth. The overall non-foods category is still in negative, although there is a marginal uptick from -9.6% in January-March to -6.4% in April-June.
During April-June, urban markets revived with positive volume growth of 0.6%, compared to slower recovery in rural markets of -2.4% for the quarter.
The consumption revival has also brought small manufacturers back on track who saw positive volume growth of 1.8% in Q2 2022, from –8.5% in Q1 2022 on the back of unit growth, primarily in food.
“Small manufacturers suffered last year because of lockdown, consumption decline and it was accentuated by inflationary pressure as they were not able to pass on the rise in raw material to customers,” said Sonika Gupta, customer success lead (India), NielsenIQ.