BQ Survey | Slowdown In Demand Persists In First Quarter For Consumer Goods Makers

Sales volumes were either flat or rose marginally in the three months ended June, the survey of 11 distributors in 10 states, including Delhi-National Capital Region, revealed. They spoke on the condition of anonymity out of business concerns.

Multiple indicators from auto sales to consumer goods volumes point to a slowing economy. Makers of cars to shampoos hoped a good monsoon to drive demand in the second half. But late rains delayed sowing, which could impact output and incomes.

BloombergQuint’s survey found that the sluggishness persists. Here are some of the findings:

• Distributors in states, including Maharashtra, Kerala, Telangana, Uttarakhand and Punjab, indicated that the consumption slowdown is yet to ease.
• In eastern market, especially Odisha, cyclone Fani ate into 15-20 days sales of distributors.
• Demand for food products was higher in some states, but an extended winter impacted growth of ice creams and juices, the survey found.
• Volumes of personal-care categories including soaps to shampoos rose in mid-single digit in Mumbai and the rest of Maharashtra.
• Demand for food products remained flat in Maharashtra and West Bengal.
• Packaged foods saw a marginal decline in demand in Maharashtra and Telangana. It fell by mid-teens in Karnataka.
• Overall, growth has fallen from about 12 percent to mid-single digits, according to a distributor in the north.

Fast-moving consumer goods makers confirmed the trend.

Demand across geographies was “soft” in the quarter ended June, Godrej Consumer Products Ltd. said in a statement. Volumes in India were seen in “mid-single digits”, it said, adding that sales of hair care products were a tad lower than a year earlier.

Marico Ltd., the maker of Parachute coconut oil, said in a statement that a moderation in demand was evident in consumer sentiment indicators. That was reflected in the sluggishness in wholesale channels, it said. Return of cash in the hands of consumers after the late onset of monsoon will be important to monitor for signs of revival, Marico said.

Higher Credit Period

To ease the situation, companies have started offering higher credit, according to distributors in Maharashtra and Punjab, as they face competition from supermarkets and hypermarkets in the large cities. Consumer goods makers now offer credit of up to 10 days against two to three days earlier, they said.

Distributors across states are also seeing demand shift to supermarkets and hypermarkets.

Consumers now go to large stores in search of discounts that the general trade or mom-and-pop stores can’t offer, a large distributor in the north said. Customers also have the convenience to shop in an air-conditioned environment, he said.

While, general trade through mom-and-pop stores contributes 90 percent to the FMCG industry’s volumes, modern trade is expected to have a lasting impact.

Distributors selling products of a single company are also facing competition in Maharashtra from an emerging larger competitor which is offering only high-selling brands of multiple companies.

These brands also helped generate sales for other products in the category, a large seller of FMCG products in the state said. With many mom-and-pop stores buying high-selling brands from the competitor, sales of other products too have taken a hit, the seller said.