Despite the widespread effects of the great recession, the Indian economy was resilient during the first half of the five-year meltdown. The last two years, however, have been a different story.
Are consumer buying?
The adverse climate has affected discretionary spending on fuel, apparel, holidays and out-of-home entertainment. However, spending on categories like food, at-home entertainment and cigarettes has been largely unaffected, according to Nielsen Global Omnibus Consumer Confidence Survey Q1 2013, India. The downturn has had a significant impact on the automobile, insurance and consumer durable sectors.
The going gets tough
While the FMCG industry has been generally immune to the macro-economic stresses, it has started to show signs of giving in. The growth trajectory has dwindled since December, 2012. Nielsen retail measurement data suggests that the sector in the first three quarters of 2013 experienced stress, as the FMCG value growth dipped to a single digit in the Q3.
Significantly, India's volume-based growth, which hovered around 10 per cent throughout 2012, has fallen. Whatever value growth the FMCG industry experiences in 2013 is largely due to unit value change - a combination of price hike,reduction in unit pack size and consumers shifting to premium brands.
Deep impact
The slowdown in FMCG has been most severe in south India and in modern trade. The slowdown has affected middle India (towns with a population of 100,000-1 million) the most. The rural market, in spite of its promise, has witnessed a steady decline in FMCG since Q4, 2012. (Click here for charts)
Food for thought
The foods, household and personal care segments have largely driven the slowdown. However, demand for impulse categories like salty snacks and chocolates improved, thanks to growing distribution that helped boost 20 per cent growth.
The non-food categories have experienced greater slowdown; distribution growth in this segment has been almost stagnant. In fact, most of the big over-the-counter categories, barring antacids, witnessed shrinkage in distribution, leading to significant softness in growth over the previous year.
Silver lining
FMCG marketers could look forward to an above-normal monsoon that would boost private consumption in rural India, showing signs of improvement (2.2 per cent growth in Q3 as compared to 1.6 per cent in the previous quarter).
Are consumer buying?
The adverse climate has affected discretionary spending on fuel, apparel, holidays and out-of-home entertainment. However, spending on categories like food, at-home entertainment and cigarettes has been largely unaffected, according to Nielsen Global Omnibus Consumer Confidence Survey Q1 2013, India. The downturn has had a significant impact on the automobile, insurance and consumer durable sectors.
The going gets tough
While the FMCG industry has been generally immune to the macro-economic stresses, it has started to show signs of giving in. The growth trajectory has dwindled since December, 2012. Nielsen retail measurement data suggests that the sector in the first three quarters of 2013 experienced stress, as the FMCG value growth dipped to a single digit in the Q3.
Significantly, India's volume-based growth, which hovered around 10 per cent throughout 2012, has fallen. Whatever value growth the FMCG industry experiences in 2013 is largely due to unit value change - a combination of price hike,reduction in unit pack size and consumers shifting to premium brands.
Deep impact
The slowdown in FMCG has been most severe in south India and in modern trade. The slowdown has affected middle India (towns with a population of 100,000-1 million) the most. The rural market, in spite of its promise, has witnessed a steady decline in FMCG since Q4, 2012. (Click here for charts)
Food for thought
The foods, household and personal care segments have largely driven the slowdown. However, demand for impulse categories like salty snacks and chocolates improved, thanks to growing distribution that helped boost 20 per cent growth.
The non-food categories have experienced greater slowdown; distribution growth in this segment has been almost stagnant. In fact, most of the big over-the-counter categories, barring antacids, witnessed shrinkage in distribution, leading to significant softness in growth over the previous year.
Silver lining
FMCG marketers could look forward to an above-normal monsoon that would boost private consumption in rural India, showing signs of improvement (2.2 per cent growth in Q3 as compared to 1.6 per cent in the previous quarter).
The author is Director, Nielsen India