FMCG sector to see subdued growth till September quarter: Kantar report

The Indian fast-moving consumer goods (FMCG) sector is expected to see subdued growth up until the September quarter of the ongoing calendar year, said a report by Kantar. Clearly continuing weakness in demand -- not just in rural parts but also in urban areas -- is taking a toll.

According to the Kantar FMCG Pulse report, the sector was growing at 4 per cent at the start of 2023, propelled by the wheat flour or ‘atta’ prices. With ‘atta’ growing in double-digits, the sector seemed to have grown at 6.1 per cent.

“However, removing atta from the mix brought the growth down to 2.7 per cent. Incidentally, 2.7 per cent is also the population growth in the year, which meant that FMCG volumes have grown purely on the basis of household population growth,” the report added.

 

In 2024, consumption might see a stagnation in the early part of the year before getting progressively better in the later half, stated the report.

The firm attributed this subdued growth to a host of factors, including a global slowdown, minimal impact of the upcoming general elections, and a lasting impact of unexpected weather conditions on the agriculture sector.

With El-Nino impact expected to keep weather dry for the first half of the year, the agriculture outlook for 2024 is a mixed bag.

“It seemed to have an impact on the Kharif crop harvests. Agricultural growth is projected to be at 1.8 per cent in 2023-24. This is a seven-year low and is likely to impact the first half of 2024.

“However, the Rabi sowing, though mildly disturbed is much better. El-Nino is also expected to wane by the middle of the year…the year might yet turn good, especially in the second half,” it said.

Summer, meanwhile, is expected to help categories like bottled soft drinks, ice creams, sun screens, and even laundry products to an extent.

“However, the growth in these categories combined will have a negligible impact on overall FMCG,” the report added.

The research firm further said that consumption in the year 2023 saw a slight decrease, with average household purchase (without atta) falling to 117.1 kg per household from 117.2 kg in 2022.

“After the pandemic, this is the second straight year where average purchase quantity has failed to grow,” the report stated.

However, “spends in the same time period have jumped from Rs 15,513 to Rs 17,907.

The 8.5 per cent growth in FMCG spends in 2023, is higher than the average inflation rate of 5.7 per cent for the year,” it added.

Out of the over 90 categories and subcategories Kantar tracks, about 50 per cent either lost consumption, or were static.

The biggest such average consumption drop was seen for cooking Oils, where 1.4 fewer liters were purchased in 2023, compared to 2022. This was followed by washing powders, which lost 300 grams per household; Basmati rice, which lost 180 grams; and salt. which lost 80 grams.