Market research firm Nielsen on Thursday cut its forecast for India’s fast moving consumer goods (FMCG) sector to flat growth in the current year, citing the severe restrictions on movement of people and goods due to the COVID-19 pandemic.
“Keeping these unprecedented dynamics in the market”, Nielsen revised its outlook and said it sees branded FMCG industry to be in the flat growth range (-1% to 1%) this year, as against a 5-6% expansion projected earlier.
This is Nielsen’s second revision for 2020. In January, it forecast 9-10% growth for the industry.
“COVID-19 is an unprecedented event in the recent history of mankind, impacting economies and industries across the country. The bellwether FMCG industry, which was trying to revive from a difficult 2019, had a significant hit in the April-June quarter with a 17% decline in sales value as compared to the same quarter of 2019,” Nielsen said.
It added that severe and extended lockdowns, restrictions on manufacturing units and movement of people and goods, social distancing norms and store closures had a significant impact on Indian FMCG industry, so much so that the industry growth went to a negative zone in the first half of 2020, declining 6% during the January-June period.
However, the research firm noted that in line with macro indicators, FMCG industry also displayed early signs of revival with the unlock period in June, when the industry saw a positive growth of 4.5% over June 2019. This follows a year-on-year decline of 28% in April-May’20.
The firm also expects an uptick in consumption especially in Q4 (October-December 2020) driven by “pseudo seasonality driven” by festivities, coupled with a lower base of 2019.
Noting that rural India has been comparatively insulated from Covid-19 so far, Nielsen expects an overall positive uptick due to reverse migration.
“After witnessing slower growth compared to urban in Q1’20, rural markets led the industry revival in June with a double digit (12%) growth versus June 2019. At an overall quarter level also, Rural markets were less impacted as compared to their urban counterparts (11% decline for rural vs. 20% for urban),” the company said.