 "Sales of durables, FMCG head in opposite directions")
India's consumer story is seeing an interesting twist - while fast-moving consumer goods (FMCG) are continuing to show signs of huge stress, the consumer durables sector is growing at a fast clip.
Figures provided by IMRB Kantar Worldpanel show growth in sales of FMCG products have remained in low single digits in the past few quarters, but growth in consumer durables and appliance have ranged between 10 and 17 per cent, according to Consumer Electronics and Appliances Manufacturers Association (CEAMA).
Experts say there are several reasons for this divergent trend. Though the rural distress due to deficient monsoon, poor harvests and lower rural disposable income remains a common theme for both, it has hurt the FMCG market more. That, according to the Boston Consultancy Group, is explained by the fact that the contribution of the rural market is relatively low in durables (25 per cent) than in FMCG (45 per cent).
The low penetration of consumer durables in Indian households has also helped in boosting air-conditioner and washing machine sales by 15 per cent and 10 per cent, respectively, during 2015-16, according to CEAMA. Television sales grew by 15 per cent partly due to replacement buying and partly due to the fact that TV penetration in India is 60 per cent, against the global average of 90 per cent. Renewed growth in sales prompted durable manufacturers put more stress on strengthening their base in India last year. While, Haier announced Rs 470 crore investment to expand its manufacturing unit in Pune, Videocon earmarked Rs 1,000 crore for expansion and upgradation over the next three years. Sony started manufacturing its Bravia range of TV panels after a decade in India.
Easy consumer finance in urban and semi-urban markets makes purchase of durable items easier as well. Take Manoj, a driver in Delhi, who bought a television set in February to watch the ICC World Twenty20 matches. While his employer is watching her grocery bills, easy finance helped Manoj buy the TV. An equated monthly instalment scheme was unheard of in Manoj's village in Jodhpur district of Rajasthan.
"After staying in Delhi for a year, I figured I could buy a Rs 14,000 TV set on EMI," he says.
The growth in consumer durable sales this year is also on a lower base. "A dip in sales earlier made the figures this year look better. Between October 2013 and October 2014 the sector shrank by 35 per cent," says Rajat Wahi, partner and head, consumer market, KPMG in India.
According to Abheek Singi, senior partner and director, Asia Pacific and India, The Boston Consulting Group, FMCG companies need to expand their distribution to beat the slowdown. Around 250,000 of the country's 630,000 villages are catered to by FMCG companies.
"About 55 per cent of FMCG sales are influenced by marketing factors and the rest by macroeconomics. There is still a strong chance for driving growth for FMCG brands," a Nielsen report stated recently. According to the report, consumers spent less on non-essentials like breakfast cereals, ketchup and coffee to save more. The effect is seen on some of the country's top FMCG companies. Volume growth of Hindustan Unilever remained at six per cent during the December quarter, after it grew by seven and six percent in the previous two quarters respectively.
Dabur, which started the 2015-16 fiscal with 8.1 percent growth in April-June, shrunk by 2.5 per cent in December, after growing by five percent during the September quarter. Colgate-Palmolive's sales volume grew by one percent in December down from three and 2.5 percent in the previous two quarters.
Godrej Consumer and Britannia remained ahead of its peers with volume growths ranging between nine and 13 percent during 2015-16.
Although, Marico posted 10 percent growth in December, its sales grew by mid-single digits during the previous two quarters.
