Business

FMCG growth slows to single digit in 2019: Nielsen

Silver lining: Growth in the last quarter of 2019 showed signs of the slow down stabilising. getty images

Silver lining: Growth in the last quarter of 2019 showed signs of the slow down stabilising. getty images  

Macroeconomic factors, consolidation among small players led to slowdown

After two years of clocking double-digit growth, the fast moving consumer goods (FMCG) segment slowed down to single digit growth in 2019 even as the last quarter of the previous calendar year indicated that the slowdown is showing signs of abating.

Nielsen said FMCG grew at 9.7% in 2019, much lower than the previous year’s growth of 13.5%. Further, the growth trend was dampened by a drop in volume growth — down to 5.8% from 10.5% in 2018 — while price-led growth sustained at 3.4%.

“[The year] 2019 has been a tough year for the FMCG industry with a four percentage point decline, but we do see it stabilising in the last quarter of the year. A mix of macroeconomic factors, and channel and zone factors driven by manufacturers, coupled with consolidation of smaller players have been instrumental in the slowdown,” said Prasun Basu, South Asia Zone President, Nielsen Global Connect.

“A lower pace of innovation has further limited consumer demand pick up. However, 2020 offers a stable outlook for the industry arresting the 2019 decline,” he added. More importantly, the growth in the last quarter of 2019 — although much lower than the corresponding year-earlier quarter — showed signs of the slowdown stabilising to a certain extent.

“The last quarter of 2019 saw the FMCG industry grow at 6.6% (7.3% with e-commerce), indicating an arrest as against the sharp slowdown witnessed in the previous quarters. The same period a year ago was a high double digit (15.7% in Q4 2018),” said Nielsen.

Going ahead, the growth in the first quarter of 2020 is expected to be in the range of 8% to 9% — the lowest first quarter growth in three years. Nielsen expects the full year growth to be between 9% and 10%.

Rural demand recovery

In a similar context, rating agency Crisil has said that an expected recovery in rural demand, coupled with steady urban demand, is set to lift revenue growth of the FMCG sector to 10-11% in fiscal 2021, close to the levels witnessed in fiscal 2019.

“Rural demand is expected to recover gradually from March-April 2020, riding on an increase in farm incomes given better storage levels in reservoirs after a good monsoon, better rabi output and good visibility for the upcoming crop seasons,” stated Crisil.

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Printable version | Feb 23, 2020 1:48:03 AM | https://www.thehindu.com/business/fmcg-growth-slows-to-single-digit-in-2019-nielsen/article30618582.ece

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