Slow-moving consumer goods, four quarters in a row

Growth in the fast-moving consumer goods (FMCG) sector has slumped in the past four quarters in a row since July-September 2018, both by value and volume, as consumers shifted to cheaper daily essential brands in the urban markets and rural growth slowed.

Value growth, or revenue earned, fell from 16.5% in July-September 2018 to 10% in the June quarter this year, according to industry officials quoting market researcher Nielsen. Growth by volume, or the number of packs sold, dropped from 13.4% to 6.2% in the same period.

Britannia Industries managing director Varun Berry attributed the current slowdown to a combination of reasons that have persuaded consumers to turn thrifty.

“Apart from a slowdown in rural markets, all wealth-creating factors are looking negative,” he said. “The real estate market has been considerably down and now the stock market as well. Consumers are feeling that they have lost net worth and seem to be going easy on consumption.”

‘Definite Signs of a Slowdown’

The economic slowdown has been hurting demand in Asia’s third-largest economy, with weakened domestic investments and risks to global economic growth impacting growth forecasts.

In recent weeks, both the International Monetary Fund (IMF) and the Asian Development Bank (ADB) have lowered India’s growth forecast, citing headwinds in domestic and global markets. The IMF estimated the Indian economy will grow at 7% this year, down from an earlier forecast of 7.3% on a weaker-thanexpected outlook for domestic demand. The ADB lowered growth forecast to 7% for this year, on the back of fiscal shortfall concerns.

“The economy is showing definite signs of a slowdown, and it is being witnessed across industries,” said Dabur chairman Amit Burman. “FMCG industry growth rates have, in fact, hit a near two-year low, and this is being felt across urban and rural markets.”

Industry representatives said core inflation at its lowest level in almost two years also translates to weakness in consumption demand, with lower rural wage growth and a delayed monsoon further dampening sentiment. Some are looking forward to a revival in the next few months.

“We are witnessing a consumption and liquidity challenge across multiple channels over the past few quarters,” Marico managing director Saugata Gupta said. “However, we expect things to turn around in the festive quarter.”

A report by ratings agency CRISIL released last week forecast growth at 6.9% this fiscal, or 20 basis points lower than its earlier estimate. It attributed the lowering of the projection to an inadequate monsoon, slowing global growth and sluggish highfrequency economic data. The report said the second half will find support from monetary easing, consumption and a statistical low-base effect.

The Reserve Bank of India (RBI) is likely to cut the benchmark policy rate by another quarter percentage point on Wednesday, amid growth concerns across various consumption pockets, according to most respondents in an ET Survey.

Last month, Nielsen revised its growth forecast for the FMCG sector to 9-10% in 2019 from its previous outlook of 11-12%, citing a sharp rural slowdown.

“At the beginning of the year, we saw a softening, driven by essential and impulse food categories,” Sunil Khiani, head of retail measurement services, Nielsen South Asia, had said at the time of releasing the report. “However, the second quarter witnessed a slowdown across all food as well as non-food categories with salty snacks, biscuits, spices, toilet soaps and packaged tea leading the slowdown.”

Berry, who heads the country’s largest biscuits company, is looking to the government to help revive demand. “We are hoping the government will take requisite steps to bring liquidity in the market and bring back the optimism to get consumption to grow once again,” he said.

Source:- https://retail.economictimes.indiatimes.com/news/food-entertainment/personal-care-pet-supplies-liquor/slow-moving-consumer-goods-four-quarters-in-a-row/70563433