According to NielsenIQ’s FMCG snapshot for the third quarter of the current calendar year, demand for packaged consumer products in India’s villages fell in the September quarter as consumers bought fewer or cheaper cooking oils, packaged foods, and hot drinks, pushing down overall FMCG volumes.
In the third quarter, the value of fast-moving consumer products sold in India’s villages climbed by 9.4 percent, but volumes declined by 2.9 percent, indicating that rural customers purchased fewer or cheaper goods. Meanwhile, an increase in the cost of fast-moving consumer products resulted in a 12.7% increase in price-led growth in rural markets.
This quarter, pricing played a significant role in aiding FMCG firms in attracting value growth. From Hindustan Unilever Ltd. to ITC and Marico, Indian packaged consumer goods businesses are experiencing inflationary headwinds, leading them to boost prices on everything from soaps to detergents and tea.
Overall, the FMCG industry grew by 12.6 percent year on year, owing primarily to urban development.Volumes increased by only 1.2 percent in the three months ending September 30, but the industry grew by 11.3 percent due to price increases.
The figures indicate the increasing inflationary challenges that businesses are now facing. Households are feeling the pinch as well, and they are either reducing their shopping baskets or purchasing fewer items or those on offer at a discount.
This was most noticeable in categories such as edible oils, hot beverages such as tea, and impulsive foods such as salty snacks and sweets. According to the report, volume increases were driven by packaged rice, breakfast cereals, butter margarines, and chocolates.
“Consumer purchasing returned to pre-COVID levels in the September quarter. However, rural development has slowed in terms of volume and consumption, ” said Diptanshu Ray, NielsenIQ South Asia Lead.
According to NielsenIQ’s FMCG snapshot for Q3 2021, the industry grew 12.6 percent over the previous year (Q3 2020) and has experienced urban-led development, with metros on the rise. Rural India’s economy has slowed due to a reduction in consumption, yet prices have risen steadily due to high commodity costs.
The development might signal a period of caution for manufacturers of packaged consumer goods.
The food basket, which accounts for 59 percent of the FMCG business, grew by double digits as prices rose.It went on to say that macroeconomic issues, such as a high consumer price index, continued to have an influence on consumption growth throughout the quarter.
However, the unemployment rate has decreased, with rural India leading the way. The Index of Industrial Production (IIP) growth appears to be positive in the quarter, but mainly due to a base effect, as IIP fell sharply in the third quarter of 2020. Overall, the Indian FMCG industry had a considerable price-led increase in the quarter, owing to rising commodity and raw material prices, as well as high gasoline prices, which resulted in higher transportation costs. This resulted in double-digit nominal growth for the industry, but a decline in consumption (volume) growth, it stated.