In July, sales of daily essentials and groceries exhibited a sequential recovery from June as retailers replenished their stocks in preparation for Independence Day and the upcoming festive period. However, these sales figures showed a year-on-year decline due to adverse effects from unseasonal rains.
According to Bizom, which monitors kirana sales, the fast-moving consumer goods (FMCG) market experienced a 3% month-on-month expansion. However, in July, it recorded a 0.5% decline compared to the same period last year.
“Similar to last quarter, we continued to see improving demand trends for our core categories but remain cautiously optimistic. Rural areas have started to come back and the north has started to come back. I am keeping my fingers crossed because of two reasons; one, it’s still not recovered trends and it’s dependent on what happens with the whole monsoon and El Nino effects,” Sunil D’Souza, Managing Director at Tata Consumer, told investors.
The main factors impacting consumer goods sales were a 7% decrease in commodities sales due to price cuts and a 23% decline in beverage sales caused by a cooler summer season.
“We are seeing stocking picking up pace for home care and packaged foods as we build into the festival season. Also, EL Nino fears seem to have reduced with the heavy rains seen in this month as that should also help during the sowing season, which, in turn, could help ensure stronger rural demand,” said Akshay D’Souza, chief of growth and insights at Mobisy Technologies, which owns Bizom.
Hindustan Unilever cited Nielsen data revealing that after experiencing a double-digit decline, the volume in the rural market turned positive in the June quarter, in contrast to the contraction witnessed in the same period the previous year. Despite this improvement, the market growth on a two-year compound annual growth rate (CAGR) basis remains slightly down, with rural volume declining by 4%.
“Looking at demand from a consumer lens, we should be mindful that consumers are still facing high levels of cumulative inflation. As you saw earlier, due to pipeline stocks, they are consuming higher-priced inventory and hence, the volume recovery will continue to be gradual,” Ritesh Tiwari, chief financial officer at HUL, said at its earnings call.
In the first half of the month, electrical goods, including air-conditioners and refrigerators, experienced a notable 10% decline in sales, despite witnessing high demand initially. However, the situation changed when torrential rains and floods in certain regions adversely affected footfalls and overall sales. It’s worth noting that in June, these goods had enjoyed a significant surge in sales, with a remarkable 30% increase.
