NEW DELHI: Though the double-digit price rise helped India’s FMCG market grow 6% in value in the January-March quarter, it witnessed a contraction in volume terms.
According to a NielsenIQ report, the sector’s volume declined 4.1% compared to last year due to a decline in consumption across all zones and town classes, but more prominent in rural markets, which saw a 5.3% dip. This is the highest consumption slowdown in the last three quarters, according to NielsenIQ’s FMCG Snapshot report for Q1 2022 released on Wednesday.
This consumption decline is also related to higher price increases witnessed by the rural markets than Urban markets (11.9% in Rural compared to 8.8% in Urban) in the country. Notably, there is a 5.3% increase in the exit of small manufacturers due to high input cost pressures, and not being able to pass on the costs to the consumers.
FMCG companies witnessed similar trends with industry-major Hindustan Unilever reporting flat volumes growth and Marico reporting marginal volumes growth in the March quarter. FMCG giants like Dabur and Marico also pointed to weak rural demand in the same period.
Indian consumers continue to feel the impact of the price increase, said Satish Pillai, Managing Director India, NielsenIQ. “Although global macro factors persist, the impetus by the government, if supported by the normal monsoon in the country, would be encouraging.” Nestle MD and CEO in an interaction with TNIE said even after companies mitigate price increases, with the current inflation levels, there will be a short-term impact on volume growth.
The overall volume contraction is spread across categories, but the extent is significantly higher in Non-Food with a 9.6% decline as compared with Food, which has seen a 1.8% dip. Consumers are focusing on smaller packs in the category seen in salty snacks, chocolates and confectionery, says the report.
FMCG volume growth
- June quarter, 2021: 21.1%
- September quarter, 2021: 1.4%
- December quarter, 2021: -2.6%
- March quarter, 2022: -4.1
Small manufacturers’ exit due to the cost rise
There is a 5.3% increase in the exit of small manufacturers due to high input cost pressures, and not being able to pass on the costs to the consumers