Softening rural demand to slow down FMCG industry growth

Nielsen projects growth at 11-12% this year, down 2% from 2018

Consumption of fast moving consumer goods (FMCG) in rural areas appear to be softening, though it is healthy at the moment.

Monsoon is expected to play the spoilsport this year, according to market estimates, with forecasts of a below normal monsoon at 93 per cent as against a normal range of 96-104 per cent.

Rural distress

Sunil Khiani, Head-Retail Measurement Services, Nielsen South Asia, said though a slight drop was witnessed in urban growth, a significant softening of growth trends in rural India has been dampening the overall FMCG industry growth from third quarter of 2018 calendar year to first quarter of 2019.

The FMCG industry is likely to grow at a slower pace at 11-12 per cent in 2019 — almost two per cent lower than that in 2018, according to a Nielsen report.

Unveiling the India FMCG Growth Snapshot at an event in Mumbai, the report said the industry is also expected to grow at 12-13 per cent during the April to June quarter of the calender year 2019. Though at a slightly lower note than the last quarter of 2018 calendar year, the report notes inflationary pressures are mounting and has moved from 2 per cent in January to 2.9 per cent in March.

While there is a slow-down across various food categories in rural areas, the extent of drop is larger in the packaged food category.

Pointing out that the FMCG industry continues to be driven by volume growth, which is at 9.4 per cent in Q1 of 2019, Khiani said the sector contributes 69 per cent to the overall value growth.

Personal care hit

Analysts have noted the slow-down looks more transitional than structural because of a protracted winter, and delayed summer limiting off-take of summer products such as juices, talcum powder, personal care and other cooling products by wholesalers, as well as the liquidity crisis which is also pinching wholesalers, stunting their appetite.


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