FMCG growth rate increased in September quarter, signs of rural improvement seen – Gudstory

In volume terms, sales rose 8.6% in the quarter after falling 0.6% in the year-ago period, NIQ said Tuesday. Rural markets recorded a 6.4% growth in quarterly turnover after registering a decline of 3.6% a year ago. Fast-moving consumer goods (FMCG) volumes in urban markets rose 10.2% from a year ago. Rural markets are showing signs of recovery, with consumption increasing during the quarter compared to last year. Meanwhile, urban markets are maintaining a steady rate of consumption growth, the NIQ said.

After several quarters of sharp price increases, the last several months saw a reduction in prices as inflationary pressures eased. For example, many companies reduced the prices of edible oils, hair oils, skin cleansers, soaps and detergents.

High inflation also adversely affected domestic consumption, as consumers, especially in rural markets, cut back spending. In September, retail inflation fell to a three-month low due to lower vegetable prices. This has helped households buy more packaged goods, NIQ said.

“The FMCG industry has seen a further moderation in price growth since the last quarter and consumer spending power has given the much-needed boost. This is particularly evident in rural markets, where consumption across various categories has increased. Overall, moderation in inflation in the country due to base effect, recent decline in unemployment figures and other factors including LPG prices have contributed to consumer willingness to spend, said Satish Pillai, managing director of NIQ India.

India is in the midst of festivities, with spending on everything from home appliances to cars to new clothes and gifts. In their recently concluded earnings updates, consumer goods companies expect demand trends to improve in the second half of the fiscal year on the back of slow inflation and government spending ahead of the general elections.

At the all-India level, both food and non-food categories contributed to the growth in consumption. The food sector grew by 8.7% year-on-year in the third quarter of 2023. Similarly, the non-food sector witnessed a growth of 8.7% over the same period a year ago. NIQ said this growth was mainly driven by products falling under impulse categories such as salty snacks, chocolates and confectionery apart from biscuits, tea and coffee.

“Impulse food categories are displaying strong growth, and we are seeing improvement in growth in habit-forming categories like biscuits, tea, noodles, coffee, etc. after five quarters. The increase in consumer spending on discretionary categories like personal care and home care products suggests that rural consumers are starting to spend beyond essential categories. This change in spending can be attributed to the reduction in inflationary pressure. “This new optimism across the country augurs well for the festive season,” said Roosevelt D’Souza, Head, Customer Success, NIQ India.

The NIQ pointed to better demand in non-food categories, which grew 8.7% during the quarter, better sequentially than the previous three months.

NIQ attributed this to improvement in rural sales. “For the first time, volume growth in personal care categories in rural areas has turned positive. Even in urban areas, the non-food sector witnessed an improvement in consumption (volume) growth, rising to 10.4% from 8.9% in the June quarter. “An increase in the number of units sold across rural, traditional and modern trade is boosting consumption,” it said.

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Updated: 07 November 2023, 11:20 PM IST