FMCG to grow 7-9% in 2023; rural sales up in Q1: NielsenIQ
3 min read . Updated: 11 May 2023, 12:53 AM IST
PremiumRural markets posted volume growth of 0.3% during the March quarter, returning to positive growth for the first time in six quarters. The urban markets saw 5.3% growth for the quarter, according to NielsenIQ’s quarterly FMCG snapshot released on Wednesday
Market researcher NielsenIQ estimates 7-9% growth in India’s fast-moving consumer goods market in 2023, with inflationary pressures easing and the rural markets displaying early signs of growth in the first quarter.
FMCG sales are on a path to recovery, registering growth of 10.2% in value from the year earlier in Q1, besides improving sequentially, NielsenIQ said in a report on Wednesday.
Overall, quarterly volumes grew by 3.1%, showing positive growth after five consecutive quarters, primarily driven by the urban markets. The estimate is slightly lower than the previous year’s growth rate where the industry grew by 8%-10%.
Rural markets posted volume growth of 0.3% during the March quarter, returning to positive growth for the first time in six quarters. The urban markets saw 5.3% growth for the quarter, according to NielsenIQ’s quarterly FMCG snapshot released on Wednesday.
NielsenIQ follows a January to December year. “Despite global uncertainties, India’s FMCG market stands tall with a forecasted growth of 7-9% for the full year 2023. Pressure on the consumers and low confidence levels and high unemployment rate could act as headwinds. On the other hand, announcements made in the Budget 2023 on agriculture and capex investments, along with revisions in tax regime, 6.4% GDP growth forecast by RBI for the next financial year and forecast of normal rainfall (adequate timely monsoon) act as tailwinds," it added.
Value growth in the March quarter was fulled by a revival in consumption in rural India and traditional trade, that had been under duress for more than a year.
As retail inflation stabilized, price growth declined further in the March quarter. Price-led growth, primarily driven by high prices across stock keeping units, lower grammage, and discounts, stood at 6.9% in the quarter, against 7.9% in the December quarter.
The positive consumption momentum in the hinterland observed during the quarter is “heartening" and may indicate a turning point for the industry, Roosevelt D’Souza, India Customer Success Leader at NielsenIQ, said.
With more than two-thirds of the population residing in rural India, it is a critical market for consumer goods firms, he said. Prolonged slowdown in rural demand had weighed on overall consumer goods markets for several quarters.
“Urban India continues to be a growth engine in terms of value, with organized retail seeing high double-digit growth in modern trade. For the first time in the past year, we saw a turnaround in traditional trade, primarily driven by grocers."
Overall, growth was led by the foods category—especially staples. Foods reported 4.3% volume growth; while the non-foods category grew only 0.2% dragged by a fall in demand for personal care products.
“After six consecutive quarters of decline, consumption growth for non-food categories turned positive this quarter led by growth home care, but personal care continues to fall," it added.
The report by NielsenIQ comes after large FMCG firms announced their Q1 earnings. The largest packaged consumer goods company, Hindustan Unilever, too highlighted an improvement in rural demand. FMCG market showed “gradual improvement" with rural slowdown bottoming out, HUL’s management said last month.
The total FMCG market volumes which were declining earlier have now become flat. While rural volumes continued to decline, the extent of decline reduced during the quarter, the company said.
“The drop in the rate of inflation overall in the economy has also led to a decline in inflation for food categories and given an opportunity to consumers to be cautiously optimistic. This can be seen in the shifts in consumption patterns in the quarter gone by, and by consumers that are now willing to buy more," said Satish Pillai, Managing Director, India, NIQ.