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FMCG industry reports volume decline in Jan.-Mar as consumption slows: NielsenIQ

There was also an increase in the exit of small manufacturers in the FMCG sector due to high input cost pressures, as they were not able to pass on the costs to consumers.

There was also an increase in the exit of small manufacturers in the FMCG sector due to high input cost pressures, as they were not able to pass on the costs to consumers. | Photo Credit: NIHARIKA KULKARNI

The FMCG industry saw a decline in volume in the January-March period as consumption was impacted by price increases, especially in the food and essentials categories, according to a report by data analytics firm NielsenIQ.

Rural India witnessed a 5.3% dip in volume, the highest consumption slowdown in the last three quarters, FMCG Snapshot released by NielsenIQ's Retail Intelligence team showed on Wednesday.

Besides, there was an increase in the exit of small manufacturers in the FMCG sector due to high input cost pressures, as they were not able to pass on the costs to consumers.

"A decline in consumption is echoed across all zones and the town classes, but more prominent in rural markets, which sees a 5.3% dip – the highest consumption slowdown in the last three quarters. The South and North zones witnessed more than 5% volume decline," it said.

However, the FMCG industry witnessed 6% revenue increase year-on-year led by a "double-digit price growth".

"Rural markets have witnessed higher price increases than urban markets (11.9% in rural compared to 8.8% in urban) in the country, and hence more stress on consumption decline," said NielsenIQ.

The overall volume decline is spread across categories, but the extent is significantly higher in the non-food segment.

The non-food segment of FMCG witnessed volume decline of 9.6% during the quarter under review, while the food segment fell 1.8%.

Moreover, the industry is also witnessing downtrading as consumers are shifting towards smaller pack sizes, said NielsenIQ.

"Within foods, impulse beats the slowdown (positive volume growth of 1.5%) with consumers focusing on smaller packs in the category seen in salty snacks, chocolates and confectionary. The staples product basket with categories such as refined and non-refined edible oil, vanaspati, packaged atta has shown a nearly 15% price increase," it said.

NielsenIQ Customer Success Lead (India) Sonika Gupta said consumers were scaling back more on discretionary spending within the non-food categories.

"Overall, there is an evident shift by consumers to smaller pack sizes to manage external factors for both foods and non-foods. Keeping this in mind, manufacturers and retailers need to ensure the right assortment of pack sizes across brands to account for this consumption shift,” she said.

According to the report, the modern trade shows evidence of stabilisation in recent quarters, with volume growth of  5.3% in January-March. However, traditional trade such as kiranas saw a volume decline of 4.9% led by shift towards smaller packs.

“In continuation from last year, macroeconomic indicators are still guiding consumption patterns for the Indian consumer, and they are feeling the impact of the price increase - especially in the food and essentials categories”, said NielsenIQ Managing Director India Satish Pillai.

However, he also added though global macro factors persist, the impetus by the government, if supported by the normal monsoon in the country would be encouraging.

"Within this environment, retail trade continues to be optimistic, and traditional trade shopkeepers have maintained stock levels, as well as assortment," Mr. Pillai added.


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Printable version | Sep 17, 2022 9:21:36 am | https://www.thehindu.com/business/fmcg-industry-reports-volume-decline-in-jan-mar-as-consumption-slows-nielseniq/article65484413.ece