Beauty segment led India's FMCG recovery in June to pre-Covid level

Trend comes as a surprise as consumers remain cautious of spending

India’s Rs 4.3-trillion fast-moving consumer goods (FMCG) market rebounded in June to pre-Covid-19 sales levels, but a big surprise was that the revival was led by the beauty category.

The data shared by market research agency Nielsen on Friday showed that the category saw a sharp recovery in June versus other contributors to growth, including food, hygiene and rural.

On an index of 100, non-foods, led by beauty, stood at 104 in June as against 72 in May, Nielsen said. In foods, the index was 94 in June versus 78 in May. And in rural, it was 109 in June versus 84 in May.

Overall, the domestic FMCG market bounced back to levels of 98 in June compared with 75 in May and 101 in March before the nationwide lockdown was announced. The pre-Covid March index for foods was 103, and for non-foods, it was 99.

Within hygiene, toilet soaps, a large category, rebounded to levels of 114 in June versus 96 in May. It was constant at 100 in March. Floor cleaners revived to levels of 118 in June versus 86 in May and 111 in March, said Nielsen. April was not considered for the study because it was a period of complete lockdown, the researcher said.

Prasun Basu, president, South Asia, Nielsen, attributes the growth in the beauty segment in June to “hoarding behaviour” visible in the category.   

“In the initial phase of the lockdown, the emphasis was mostly on stockpiling essential products,” Basu said.

“As the country moved into the Unlock phase in June, non-essential services began opening up. At the same time, consumers wanted to break free to some extent from their restricted living, wanting to lay their hands on products they had missed during the lockdown. The surge seen in the beauty category is on account of this," Basu said.

While hoarding behaviour typically does not last long, Basu says the uptick in the beauty category augurs well for the overall FMCG market. "Not everything is in recession,” he said.

 “At a time when consumers remain cautious of their purchase basket, it is heartening to note that there is some spending outside of daily-use items. We are watching this trend closely," he said.

Yet, most experts warn that the financial year 2020-21 (FY21) will not be easy for businesses in general. On Thursday, ratings agency ICRA revised its forecast for contraction in the country's gross domestic product in FY21 to 9.5 per cent from 5 per cent earlier, as local lockdowns have affected recovery, it said.

Basu said the impact of these localised lockdowns would be limited, in line with what some other brokerages such as Motilal Oswal and Sharekhan have said in their recent reports. "Local lockdowns are mostly in big cities. As of now, the impact will be limited to these places, as lockdowns have not moved to small towns and cities. 

But, as the infection spreads, we would have to keep an eye on the impact on business," Basu said.

India has crossed the 1-million mark in terms of Covid-19 cases and remains the third most affected country in the world due to the disease, after the US and Brazil. 

A survey by Nielsen done in June shows that consumers remain bearish about travelling, dining out and spending on luxury products, choosing to indulge in these passions after the health crisis has eased.

As far as the beauty category goes, looking and feeling good matters, prompting segments such as deodorants to jump to levels of 120 in June from 19 in May. It was constant at 100 in March. 

Hair colour, on the other hand, has moved to levels of 102 in June from 43 in May and 100 in March. 

Skin care stands at 82 in June versus 48 in May and 87 in March.