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FMCG sales hit a slump in August as traders exercise caution in inventory management due to poor rainfall

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In August, India witnessed an 8.4% decline in the value of its fast-moving consumer goods (FMCG) sales compared to the previous month. This drop was attributed to the exceptionally low rainfall, which hindered the emerging revival of rural demand. Consequently, local small retailers became cautious and opted to maintain minimal inventory levels in preparation for the upcoming festive season.

In July, there was a 3.1% month-on-month increase in the sales of a wide range of products, from groceries to personal care items. This growth was supported by the recovering rural demand, which had finally entered positive territory after more than a year of pressure, as indicated by the latest data from the retail analytics platform Bizom. However, in August, consumer goods sales experienced a double setback, declining both month-on-month and by a significant 11.2% compared to the previous year.

With the August rain shortfall being at almost a 100-year low, we see kiranas stocking very carefully,” said Akshay D’souza, chief of growth and insights at Bizom. “As we look ahead, it seems that the impact of rains in September will be critical to the sowing season, and this could impact sentiment and consumption of FMCG products, especially in rural areas.”

In August, India experienced its driest month in over a century, receiving a mere 36% of its typical monthly rainfall. The deficiency in rainfall was attributed to the strengthening of the El Nino phenomenon and unfavorable weather conditions in both the Arabian Sea and the Bay of Bengal. Data from the India Meteorological Department revealed that a significant shortfall in rainfall was observed across most of India, except for northeastern India, the Himalayan states, and certain areas of Tamil Nadu. Regions that particularly suffered from low rainfall included Bihar, eastern Uttar Pradesh, Chhattisgarh, Kerala, Gangetic West Bengal, Jharkhand, parts of Karnataka, and Maharashtra.

Rural sales witnessed a substantial decline of 17.2% in August compared to the previous month. This stark contrast comes after a promising 2.3% growth in rural sales during the preceding month. Conversely, urban demand showed a more modest uptick of 1.9% in August, in sharp contrast to the 7% decline experienced in July. The notable drop in edible oil prices significantly influenced urban sales last month, as highlighted by Bizom.

“Even as we expect edible oil prices to hold up during the festival season, the prices are currently down by over a third year-on-year, leading to a drop in sales value. And, as a result, commodity product sales are also down by almost a fourth compared to the previous year,” said D’souza.

The sole exceptions to this pattern are confectionery and packaged foods, with their growth primarily attributed to the popularity of gift packs.

Mondelez India Foods Ltd., the producer of Cadbury, stated that demand is appearing optimistic due to increased consumption during the Raksha Bandhan festival in August.

Parle Products Pvt. also experienced an upturn in sales of impulse categories. Nevertheless, the packaged goods manufacturer has expressed a note of caution regarding the current inflationary trend and the unpredictable nature of the monsoon, both of which will play a significant role in determining the extent of future demand growth.

“The next 15-20 days are crucial, and if we don’t see the monsoon reviving, then it may have a bearing on the feeble rural demand recovery,” said Mayank Shah, senior category head at Parle Products.

Nonetheless, the Indian Meteorological Department (IMD) anticipates a revival of the southwest monsoon in September, marking the final of the four monsoon months.

SnackTeam
SnackTeamhttps://snackfax.com
SnackTeam is a specialised group of editorial staff motivated to improve the lives of individuals and society. The team intends to bring the most authentic, well-researched and dependable content for you and your loved ones every day.
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