In November, orders placed with fast-moving consumer goods companies by kiranas or local neighborhood stores, which account for over 85% of their sales, experienced a 7.5% decline compared to the same period last year.
The surplus inventory from pre-Diwali orders has led to this situation, as retailers find themselves with unsold stock that did not generate sufficient demand, particularly in rural areas.
According to Bizom, which analyzes data from orders at almost 7.5 million kirana stores, there was a 3.5% decline in orders compared to the preceding month, October.
“Demand has been challenging over the past few months and last month’s decline may have been triggered by uncertainty in consumer sentiment, especially in states where elections were due. Recovery will be seen only when there are visible greenshoots in rural markets,” said Sushil Kumar Bajpai, president, RSPL Group, which makes Ghari detergent and Venus soap.
FMCG companies had suggested that the ongoing decrease in rural markets had ceased in the September quarter. However, insufficient rainfall, coupled with a surge in food prices, impacted the latter part of the quarter. According to Bizom, sales in villages experienced a year-on-year decline of 9.6% in November, surpassing the 3.5% decline in cities. Bizom anticipates that the recovery in rural consumption might take a bit longer.
“As we move deeper into the winter, we expect to see winter products such as skin creams, room and water heaters, hot beverages, etc across categories to build up greater stock at stores as consumers start lapping them up with falling temperatures,” said Akshay D’Souza, chief of growth and insights at Mobisy Technologies, which owns Bizom.
The month-long festive season from Navratri till Diwali, covering Durga Puja, Dussehra, Karva Chauth, and Dhanteras, is the largest consumption period in India. It accounts for a third of annual business for most consumer electronics companies.
According to industry estimates, sales of home appliances like refrigerators, washing machines, and air-conditioners showed a sequential growth of 15-16% in both value and volume in November. This increase is attributed to Diwali purchases and elevated sales in the mid-to-premium segment, particularly in urban and semi-urban markets.
Nevertheless, there was no sequential growth in sales for mass and entry segment products.
In terms of year-on-year comparison, the categories experienced an 80-85% growth, but this figure is not directly comparable due to Diwali occurring a month earlier in October last year. However, in comparison to 2020, when Diwali fell in mid-November, the overall market remained stagnant this year, with sales of entry-level mass segment products declining by approximately 8-10%, as reported by industry executives.
