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Sales of fast-moving consumer goods (FMCG) declined year-on-year (YoY) in the April-June quarter (Q1FY24), both in rural and urban areas, dragged down by a sharp fall in the beverages category due to unseasonal rainfall, followed by personal care products and confectionery, data from retail intelligence firm Bizom showed on Thursday.
The sales slipped 4.7 per cent and 4.6 per cent in urban and rural India, respectively. The overall FMCG sales were down 4.6 per cent YoY in the quarter ended June 30, 2023. Tier 1 and tier 3 cities saw a steeper drop, with the sales falling 6.4 per cent and 7.2 per cent, respectively, according to the data.
Within FMCG, beverage sales were down 27.6 per cent in the quarter compared to the year-ago period, while personal care and confectionery sales fell by 11.5 per cent and 7.6 per cent, respectively. These three categories saw the biggest decline in sales both for Q1 as well as the month of June. Among categories that posted an increase in sales in Q1 included home care (up 14.7 per cent) and commodity (6.9 per cent growth).
For June, though, the decline was relatively low, with the overall FMCG sales down by 1.1 per cent over the year-ago period.
Bizom noted that a lower off-take of summer products impacted FMCG sales, especially beverages, in the first quarter, driven by a cooler summer due to unseasonal rainfall.
“There also seems to be a lower spending on discretionary products, which is evident in sales of both personal care as well as confectionery products,” Akshay D’Souza, chief of growth and insights at Bizom, told Business Standard. He added that sales in both urban and rural areas were impacted as concerns around inflation still seemed to be lingering in consumers’ buying behaviour.
With respect to the outlook, D’Souza said, “While the onset of monsoon has been slightly delayed, we do expect that if we get to a normal rainfall season, we could see spending getting triggered even among discretionary products.”
The government, he said, was putting in place strong measures to keep a check on prices of edible oils through import duty cuts and ensure adequate supply to tide over any potential El Nino crisis.
The upcoming festive season in August and the lower trending food inflation are definite enablers to drive consumption of FMCG products in the coming quarter, according to the data tracking firm.
“Rural has seen an increase in salaried jobs YoY, and this will be a positive for driving consumption and to cushion impact, if any, from erratic monsoon and drive consistent sales during the upcoming festival season,” he said.
Ahead of announcing their June-quarter results, FMCG firms noted in their quarterly updates that demand remained stable in Q1.
Godrej Consumer Products said the overall demand had remained steady, as seen in the previous quarters. Marico, on the other hand, noted that while urban markets were steady, demand from rural markets remained elusive.
Dabur India said that trends in both urban and rural India had shown signs of improvement. “One of the key contributing factors to this positive development has been the reduction in inflation. Sequential moderation in inflation has positively impacted consumer spending power and is resulting in gradual improvement in off-takes in the industry,” Dabur said.
The recent increase in prices of basic foods like tomato, ginger, etc, has raised some concerns. If prices rise further, it could have an impact on near-term demand.
