Despite the visibility of green shoots in the July-September period, the FMCG sector is expected to end 2020 with a degrowth in the range of -1 per cent to -3 per cent, according to Nielsen. This is due to various macro-economic conditions such as contraction in GDP and muted consumer confidence, besides factors such as high inflation and slow uptick in industrial production.
This is the third time that the research and insights firm has revised its annual growth forecast for the FMCG sector in 2020, indicating the dynamic nature of the pandemic.
While in January the FMCG sector was expected to record a growth rate of 9-10 per cent in 2020, Nielsen cut down its growth forecast to 5-6 per cent in April post the Covid-19 outbreak. Further, in July, Nielsen said that the growth rate for the FMCG sector in India will at best be flat.
Consumer durables, FMCG companies on recovery path
Value growth for the FMCG sector was pegged at 1.6 per cent in the July-September quarterafter the sector witnessed a degrowth of about 17 per cent in the April-June quarter, Nielsen stated.
Growth in the September quarter was primarily driven by strong consumption in the rural region, thanks to the good harvest due to normal monsoons and government’s stimulus measures.
Rural consumption in categories such as packaged staples, convenience foods, grooming products, home hygiene and personal hygiene outpaced urban consumption in the July-September quarter, Nielsen stated.
Talking about the annual growth outlook for the sector, Rajesh Shirali, Lead, Data Science, South Asia, Nielsen Global Connect, said: “While there have been green shoots, the headwinds are outweighing the tailwinds. It is unlikely that the growth in the fourth quarter will fully compensate for the significant degrowth witnessed by the sector in the second quarter, and that’s why we have downgraded the growth outlook in the range of -3 per cent to -1 per cent.”