The fast moving consumer goods (FMCG) industry is expected to clock double digit growth in the current year, though the growth is likely to be lower than that of the previous year, which saw the sector benefit from the overall health of the economy and lower inflation.
According to the latest study by market research firm Nielsen, the FMCG industry is expected to grow between 11% and 12% in 2019, which is a tad lower than the 13.8% growth in 2018. Incidentally, the FMCG industry growth in the fourth quarter of 2018 was quite buoyant at 15.9%. Nielsen takes into account the calendar year while making projections. The growth in the current year will be primarily on the back of conducive macroeconomic environment, rural consumption, sustained benefits of GST regime and election impact, according to the study.
“Our projections suggest that the first half of the year (Jan.-Jun) will have decent double-digit growth, while industry growth in the second half will taper down to high single digits. Similar trends will be witnessed across the key super group of product categories viz Food, Personal Care & Home Care,” the Nielsen report stated.
While GDP is expected to be buoyant at 7.5% in 2019, Consumer Price Inflation (CPI) estimates for the year suggest that it will gradually increase. However, it will be within 5%, it added.
Crude prices
The market research firm, however, added that crude prices in global markets and exchange rates would be the factors to watch out for.
Meanwhile, Nielsen expects the sustained government focus on rural infrastructure and surging non-farm income in rural areas to support rural FMCG consumption story. “Indian rural consumption story is projected to be continuing in 2019. Various farm level initiatives by the government including agri credit and direct subsidy transfer, along with orientation on minimum support prices for crops, are expected to boost farm income further,” it said, adding that rainfall performance and its spatial and geographical distribution need to be watched out for.
Interestingly, with the general elections scheduled later this year, Nielsen has highlighted how historical trends around elections in the last few years suggest that the FMCG industry demonstrates a stable to marginally lower growth in the election year.
Consumption growth in 2018 was led by favourable macros like growth in GDP, lower inflation and manufacturers passing on the benefits of margin expansion from the GST regime.