The demand for daily groceries, essentials, and household products is projected to deteriorate over the next few quarters in India, according to global research firm Kantar. This further delays the timeline for volume recovery in the fast-moving consumer goods (FMCG) industry, following a more pronounced slowdown in the December quarter.
In the December quarter, overall product volumes, reflecting consumer purchases, saw a 5.2% increase, slightly lower than the 6.9% growth observed in the September quarter. According to data from Kantar, sales volumes in rural areas rose by 4.8%, while in urban centers, they increased by 5.6% compared to the previous year. Kantar’s monitoring encompasses both branded and unorganized products, including bulk unpackaged goods. Conversely, Nielsen focuses mainly on tracking branded retail sales.
“We are likely to see another drop in the next quarter, and the current trend of slowdown is expected to stay deep into 2024,” said K Ramakrishnan, managing director, South Asia, Worldpanel division, Kantar. “The mild slowdown we saw in the September quarter became even more pronounced in the December quarter.”
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Ramakrishnan highlighted that the slowdown in demand was particularly noticeable in the food sector. “Growth here stumbled to 5.8% last quarter, from a strong 8.2% in the previous quarter,” he said.
The consumer industry in India, known for its price sensitivity, experienced a demand slump as companies raised prices by nearly 25% over the last two years to counter rising input costs. These costs initially surged due to global supply chain disruptions triggered by restrictions on mobility and business operations aimed at controlling the spread of the coronavirus. Furthermore, the subsequent combination of historically low policy rates in major economies and the conflict in Ukraine led to a sharp increase in commodity prices.
However, over the past three quarters, companies have been slashing prices amid visible consumer preference in favor of cheaper products, but the strategy hasn’t helped boost volumes just yet.
Companies, too, believe demand revival will have to wait.
“I believe it will require a couple of quarters for the recovery to materialize. Rural consumption is still facing significant pressure stemming from liquidity issues,” stated Mohit Malhotra, CEO of Dabur. “We’re observing an increase in food prices as well. Therefore, we can’t consider ourselves out of the woods until rural demand rebounds.”
The FMCG market in India saw growth of 6.1% in 2023, contrasting with a 0.1% decline in 2022, primarily driven by performance between April and September last year.
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