New Delhi: A slowdown in consumption continued to drag growth rates for fast-moving consumer good (FMCG) makers for the third straight quarter in April-June, as sales of packaged soaps, detergents and food grew at 10% during the quarter, down marginally from a year-ago period, and 6.2% from the preceding quarter, research and insights agency Nielsen said in its quarterly insights report released on Wednesday.
The slowdown was more pronounced in rural markets.
Slowdown in sales of FMCG products in the hinterland, which contributes 37% of the spends for the sector, was seen happening at a sharper pace when compared to urban markets. "Rural is slowing down at double the rate of urban," Nielsen noted in what could spell bad news for some of the country's biggest consumer goods companies that are set to announce their earnings soon.
Rural growth dipped to 10.3% in the April to June quarter, from 12.7% in the year-ago period. Compared to the last quarter, FMCG growth rates in rural markets fell sharply by 9.7%.
"Rural India has historically been growing around 3% to 5% points faster than urban on account of increasing affordability, availability and demand. However, rural growth is slowing down at double the rate of urban in recent quarters. This has brought rural growth closer to urban growth in the second quarter of 2019," Nielsen said.
To be sure, Nielsen follows a January to December fiscal year.
For the full year, Nielsen further lowered its forecast for the FMCG sector to 9-10% from its previous forecast of 10-11% on the back of a weak monsoon, and expectations of a high inflation going forward. Within this, food categories are expected to grow at a higher rate at 10-11%, while personal and home care are expected to grow at high single-digits.
For the first half of the year, growth in FMCG stood at 12% lower than Nielsen's earlier prediction of 13-14% for the same period.
"Our numbers have been revised based on how the monsoon and the news data have come in," according to Sunil Khiani, head, retail measurement services, Nielsen South Asia.
Interestingly, rural slowdown is the most pronounced in north India, followed by West India, as slowdown in rural output, reduced government spending and impending rain hit crops.
Nielsen's forecast comes at a time when consumer goods makers across the board have been witnessing a slump in demand. Some of the country’s largest consumer goods makers are set to announce their quarterly earnings. These companies are also waiting to gauge the impact of monsoon, the demand drivers for rural markets.
Earlier this year, Nielsen had lowered its forecast for the growth of FMCG goods compared to last year. It estimated growth for the sector, which sees participation from large companies such as Hindustan Unilever, Britannia, ITC, among others, to be in the range of of 11-12% in 2019.
