The FMCG industry saw decline in volume in the January-March period as consumption was impacted by price increases, especially in the food and essentials categories, said a report by data analytics firm NielsenIQ.
Rural India witnessed 5.3 per cent dip in volume in the period. This is the highest consumption slowdown in the last three quarters, said the FMCG Snapshot released by NielsenIQ's Retail Intelligence team on Wednesday.
Besides, there was an increase in the exit of small manufacturers in the FMCG sector due to high input cost pressures, as they were not able to pass on the costs to consumers.
"A decline in consumption is echoed across all zones and the town classes, but more prominent in rural markets, which sees a 5.3 per cent dip the highest consumption slowdown in the last three quarters. The South and North zones witnessed more than 5 per cent volume decline," it said.
However, the FMCG industry witnessed 6 per cent revenue increase year-on-year led by a "double-digit price growth".
"Rural markets have witnessed higher price increases than urban markets (11.9 per cent in rural compared to 8.8 per cent in urban) in the country, and hence more stress on consumption decline," said NielsenIQ.
The overall volume decline is spread across categories, but the extent is significantly higher in the non-food segment.
The non-food segment of FMCG witnessed volume decline of 9.6 per cent during the quarter under review, while the food segment fell 1.8 per cent.
Moreover, the industry is also witnessing downtrading as consumers are shifting towards smaller pack sizes, said NielsenIQ.
"Within foods, impulse beats the slowdown (positive volume growth of 1.5 per cent) with consumers focusing on smaller packs in the category seen in salty snacks, chocolates and confectionary. The staples product basket with categories such as refined and non-refined edible oil, vanaspati, packaged atta has shown a nearly 15 per cent price increase," it said.
NielsenIQ Customer Success Lead (India) Sonika Gupta said the consumers are scaling back more on discretionary spending within the non-food categories.
"Overall, there is an evident shift by consumers to smaller pack sizes to manage external factors for both foods and non-foods. Keeping this in mind, manufacturers and retailers need to ensure the right assortment of pack sizes across brands to account for this consumption shift, she said.
According to the report, the modern trade shows evidence of stabilisation in recent quarters, with volume growth of 5.3 per cent in January-March. However, traditional trade such as kiranas saw a volume decline of 4.9 per cent led by shift towards smaller packs.
In continuation from last year, macro-economic indicators are still guiding consumption patterns for the Indian consumer, and they are feeling the impact of the price increase -especially in the food and essentials categories, said NielsenIQ Managing Director India Satish Pillai.
However, he also added though global macro factors persist, the impetus by the government, if supported by the normal monsoon in the country would be encouraging.
"Within this environment, retail trade continues to be optimistic, and traditional trade shopkeepers have maintained stock levels, as well as assortment," Pillai added.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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