Even as the January-March quarter of 2020 is set to see the lowest Q1 growth in the past three years, the full-year growth forecast for the FMCG industry is stable at 9-10 per cent, finds Nielsen.
The market research and insights firm, which follows a January-December year, expects the industry to grow in the range of 8-9 per cent in the first quarter.
After two years of double-digit growth, the Rs 4 lakh crore fast-moving consumer goods (FMCG) industry has witnessed a marked slowdown in 2019 registering single-digit growth.
During the festive quarter of October-December, the FMCG industry grew at 6.6 per cent, a steady fall from 15.7 per cent growth it registered during the same period a year ago.
With the inclusion of e-commerce, the growth stood at 7.3 per cent in Q4, which is also lower, albeit marginally, than the growth in the last quarter (7.9 per cent in Q3 2019). Overall, the value growth for the full year was at tad lower at 9.2 per cent (9.7 per cent with e-commerce) as against a high of 13.5 per cent in 2018.
“2019 has been a tough year for the FMCG industry but we do see it stabilising in the last quarter of the year. A mix of macroeconomic factors, coupled with the consolidation of smaller players have been instrumental in the slowdown. A lower pace of innovation has further limited consumer demand pick up,” said Prasun Basu, South Asia Zone President, Nielsen Global Connect. Basu, however, added 2020 offers a stable outlook for the industry arresting 2019.
Nielsen also pointed out the slowdown in the fourth quarter was aggravated in general trade where small shops and kiranas continue to face a credit squeeze.
Moreover, erratic rainfalls in north and west India, high consumer price inflation—especially towards the end of the year, and job losses forced households to cut back on discretionary spends.
In a separate report, ratings firm Crisil has pegged the revenue growth of the FMCG sector at 10-11 per cent in FY21, close to the levels witnessed in FY19, aided by rural demand which is likely to recover gradually from March-April 2020, riding on an increase in farm incomes and a robust urban demand.
CRISIL’s analysis of 57 FMCG firms, which account for close to half of the industry revenue, however, shows that the rate of revenue growth may not be uniform across firms.
The packaged foods segment, which accounts for nearly half of the FMCG sector’s revenue, will continue to grow the fastest – at 9-10 per cent this fiscal and 11-12 per cent in fiscal 2021 – driven by increasing shift to branded products and deeper penetration of product segments.
The personal and home care segment, which accounts for a third of FMCG revenue, is also likely to see recovery in growth to 8-9 per cent in fiscal 2021 from 6-7 per cent in fiscal 2020.
According to an analysis by Crisil Research, growth will be lower than that of packaged foods given relatively more discretionary-spend products and higher penetration of these product categories.
“That said, with increasing raw material prices and high promotional intensity continuing next fiscal, operating profitability of FMCG firms may moderate by up to 100-150 bps next fiscal,” the report said.
However, it expects operating profitability to remain healthy in the 15-20 per cent range, with personal care and home segment firms being in the higher range.