Food inflation continues to play spoilsport for FMCG sector: Kantar report

The per household average spend in the urban market recorded a 13% jump in a year to reach Rs 6,761 this Oct quarter

The fast-moving consumer goods (FMCG) sector has witnessed a significant slowdown due to rising inflation, the latest Kantar FMCG Pulse report has found.

 

According to the report, it is not just urban markets but rural ones too that are showing signs of a slowdown.

 

The August-October (ASO) quarter reported growth of just 4.3 per cent, compared to 6.4 per cent in the same quarter last year, Kantar said.

 

"It is also a tad bit lower than 4.5 per cent (growth) we saw in the last quarter, i.e. July '24," the report added.

 

Talking about the urban sector, which has been seeing a marked slowdown in the past few quarters, the market research firm said it continues to see a sharp decline.

 

 

Volume growth in the urban sector came in at 4.5 per cent, compared to 6.9 per cent in the same period last year.

 

"On the face of it, there is definitely a slowdown. However, it is also true that a 4.5 per cent growth following a near 7 per cent growth in the previous term is extremely rare," the report stated.

 

"In fact, over the last five years, this has only happened in the quarters of 2024," it added.

 

This slowdown has mainly been on the back of increasing inflation. The per-household average spend has recorded a 13 per cent jump since the ASO quarter of 2022, reaching Rs 6,761 in this October quarter.

 

The average cost of FMCG products jumped Rs 4 to Rs 137/kg in the October quarter from Rs 133/kg in the preceding quarter this year.

 

"This kind of growth in a single consecutive quarter was only seen during the initial months of the 2022 inflation period," the report stated.

 

This is reflective of the 11.1 per cent consumer food price index (CFPI) recorded for urban India in October 2024.

 

"This CFPI growth is the highest in 15 months. With no signs of food inflation relenting in the immediate future, we might see value growth rapidly drawing away from volume growth for some more time," the report stated.

 

"As a result, it is hard to see urban growing rapidly beyond the current levels. We are expecting similar levels of growth to continue into the first half of the next year," it added.

 

Speaking to Business Standard recently, Harsha Vardhan Agarwal, vice-president and managing director, Emami Ltd, said that urban consumption has been impacted by food inflation, adding that the industry is hopeful of an improvement in the next one to two quarters.

 

The rural market, too, is experiencing a slowdown. Volume growth in rural markets stood at 4 per cent in the ASO quarter—lagging behind urban.

 

However, the rural slowdown, said Kantar, can be attributed to atta (wheat flour).

 

"Non-atta rural FMCG growth is stable linearly and is growing seasonally," the report stated.

 

The rural market recorded a strong jump in the personal care category to 5.4 per cent in the ASO quarter, from 2.8 per cent in the same period last year.

 

"Growth in personal care is generally understood as being a good indicator of a positive market, and the extent of growth here gives us more confidence in the rural market. Rural also has seen a near 11 per cent CFPI, and this has resulted in a similar value-volume growth differential here," the report stated.

 

Analysts at the market research firm do not expect major stress in the market with the continued government focus on rural development.