NEW DELHI: Cigarettes-to-FMCG conglomerate ITC in its annual report on Wednesday said the unprecedented inflationary headwinds pose significant challenges in the near term and remain a key monitorable for the FMCG industry.
During the year, the report says, the FMCG industry witnessed a moderation in growth mainly due to subdued demand conditions especially in rural markets, high inflation eating into household budgets and high base effect in certain categories such as Staples & Convenience Foods.
“Health & Hygiene personal care products witnessed demand volatility in line with varying intensity of the pandemic while remaining significantly above pre-pandemic levels. Discretionary/Out-of-Home categories witnessed strong growth on a favourable base and surpassed pre-Covid levels driven by improved mobility and progressive return to normalcy,” it said.
The year saw an unprecedented increase in prices of key inputs such as edible oils, packaging materials, soap noodles, fuel, logistics, etc. which, according to the company, exerted considerable pressure on margins.
FMCG major Britannia earlier in its report also warned of diminishing purchasing power and demand due to the economic circumstances resulting in fundamental shifts in consumer behaviour, which it said would adversely impact the market for packaged food products.
FMCG companies have been bearing the maximum brunt of rising commodity prices and geopolitical tensions which have forced them to pass on some part of the cost to consumers. As per a recent NielsenIQ report, FMCG sector volume fell 4.1% in Q4 FY22 from last year due to a fall in consumption across all zones and town classes, but more prominently in rural markets.