India's FMCG value grew 9.6% in Oct-Dec due to price increases, NielsenIQ

Volumes shrank by 2.6% due to inflationary pressure and other macro-economic factors

India’s fast-moving consumer goods (FMCG) industry quarter grew 9.6 per cent growth in the October-December quarter over last year due to double digit increase in prices for three successive quarters.  

However, the sector witnessed a volume degrowth of 2.6 per cent this quarter due to inflationary pressure, and other macro-economic factors in the country, according to NielsenIQ.

“The resulting consumption slowdown continues to be more accentuated in rural markets with –4.8 per cent consumption degrowth, while urban markets are comparatively better at -0.8 per cent,” NielsenIQ said.

During the fourth quarter, the country’s macro-economic factors continued to witness softness, and there is a long-term impact  because of global inflationary pressure, Diptanshu Ray, South Asia cluster lead, NielsenIQ explained. Adding, "Within this environment, the calendar year has seen a double-digit growth, though there has to be a watch out for continued consumption degrowth impacted by price increases.

Price increases continues to impact small manufacturers where the number of small manufacturers (with turnover below Rs 100 crore) dropped by 13 per cent, due to the difficulty of continuing operations with higher costs. Large and medium manufacturers stayed stable through the year.  

The traditional trade in both urban and rural markets has seen a –4.8 per cent volume degrowth that is leading the overall slowdown. Categories like staples or over-the-counter have seen high price increases in the last two quarters, leading to larger price growth in rural markets and, hence impacting the volumes.

In the October-December quarter, modern trade saw a 5.6 per cent volume increase over last year due to open markets and uptick in consumption in the festive season.  

NielsenIQ’s Ecommerce consumer panel, the internet shopper panel with 160,000 shoppers, shows that penetration of FMCG among online shoppers has increased from 15 per cent before the pandemic, to 25-30 per cent during pandemic and it has stayed at 25 per cent after the pandemic.

“Price growth in modern trade is lower than that seen in the traditional trade space. This is primarily led by higher promotions, and bigger pack sizes. Given the price increases overall manufacturers are also taking steps to change pack size, as well as assortment. When it comes to rural India, consumers are going back to small pack sizes to counter price increase”, said Ray. He added, “In ecommerce, each wave has seen a higher adoption by consumers in the country –  leading to the evolution of omni shoppers where home care and personal care witnesses a continued adoption on the channel”  

According to Nielsen Establishment Survey in the quarter ended December, the overall number of stores selling FMCG products in India grew at a CAGR of 4 per cent over the period of 2019 to 2021, with the addition of 800,000 stores in the country, of these  60 per cent opening in rural India. The usual annual rate of growth has been approximately 1-2 per cent in pre-Covid. “The metro-India retail store universe also grew with newer stores opening up in residential areas, to cater to consumers who were homebound for nearly two years,” NielsenIQ said in its release.

NielsenIQ release further stated that within the overall universe of retail outlets, a structural change is also evident in channel types.

There has been a change in the offtakes of shops depending on their locations, increase in specialty stores that stock FMCG products and an increase in Ecommerce. The profile of stores and channels have also brought about the net change in the retail universe.