The report attributed this subdued growth in the FMCG sector to several factors, including a worldwide economic slowdown, minimal influence from the forthcoming general elections, and enduring repercussions of unforeseen weather patterns on the agricultural industry.
A study suggests that Fast-moving consumer goods (FMCG) are poised to experience a slowdown until the September quarter of 2024, as sluggish demand in both rural and urban markets exerts pressure on the sector.
The FMCG Pulse report by Kantar Worldpanel highlighted that persistent demand weakness is impacting both rural and urban areas in India. The sector initially saw a 4 percent growth rate in early 2023, primarily driven by a surge in the price of wheat flour or ‘atta’. Notably, a robust double-digit growth in atta sales throughout 2023 contributed significantly to the sector’s overall 6.1 percent growth for the year. However, when atta sales are excluded, the sector’s growth slows down to 2.7 percent.
The subdued growth in the FMCG space is attributed to various factors, including a global economic slowdown, limited impact from the upcoming elections, and ongoing challenges posed by unexpected weather patterns in the agricultural sector. The report also notes the prolonged dry weather conditions in the first half of 2024 due to the anticipated El Niño effect, presenting a mix of challenges and opportunities for the farm sector.
Since the onset of the pandemic in 2020, there has been a consistent trend of value growth (excluding atta) surpassing volume growth by at least 4 percentage points in each quarter, until Q4 of 2023. However, in the latest quarter of 2023, certain categories experienced a shift where value growth slowed down compared to volume growth. These categories include hand wash, body wash, shampoos, floor cleaners, and cooking oils, as indicated by the report.
Despite stagnant average purchase quantities for the second consecutive year, there has been a noticeable increase in spending, indicating a post-pandemic recovery that has encountered obstacles.
The report highlighted that annual purchases (excluding atta) have remained consistent at approximately 117 kilograms per household since 2021. Despite this stability, consumer spending surged from Rs 15,513 to Rs 17,907 during the same period, marking an 8.5 percent growth in 2023, even as retail inflation hovered around 5.7 percent.
Among the more than 90 categories and sub-categories tracked by Kantar Worldpanel, 50 percent experienced either a decline in consumption or remained static. Notably, the most significant decrease in average consumption was observed in cooking oils, with households reducing purchases by 1.4 liters in 2023 compared to the previous year. This trend was followed by a loss of 300 grams per household in washing powders, a decrease of 180 grams in basmati rice, and a reduction of 80 grams in salt consumption.
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