Covid-19 Stalls FMCG Sector’s Nascent Recovery, Says Nielsen India

Value growth of India’s consumer goods makers fell to its lowest in at least seven quarters as the new coronavirus pandemic clobbered sales of the sector that was already battered by slowing consumption.

The industry’s value growth—a combination of volume and price-led expansion—stood at 5.3 percent on an annual basis in the quarter ended March, according to Nielsen India. That compares with 6.5 percent in the preceding three months and 13.4 percent a year ago.

Volume growth of the sector, too, dropped to 2.6 percent from 3.5 percent in the previous quarter and 9.9 percent in the year-ago period.

India’s fast-moving consumer goods makers, according to the market researcher, witnessed early signs of recovery and stabilisation in the first two months of the year. That may have cushioned easing volume growth for the companies amid the worst consumption slowdown in a decade. But the coronavirus pandemic only made matters worse.

Value growth stood at 6.4 percent in the first two months of the calendar year 2020. But it fell to 3.3 percent in March as the number of Covid-19 cases rose in India.

“Despite consumers buying more hygiene products like sanitisers, hand wash and floor cleaners, which fall in the non-foods category, as Covid-19 started to spread in March, major growth drivers in the categories like soaps, detergents and toothpastes did not witness any significant uptick in consumption, impacting growth of the entire category,” Sharang Pant, lead, retail vertical and RMS, at Nielsen Global Connect, told BloombergQuint.

• In January and February, value growth in the foods segment stood at 8.6 percent. It fell to 6.2 percent in March.
• Value growth of the foods segment stood at 7.8 percent during the quarter, while that of the non-foods category was at 1.8 percent.

With the inclusion of e-commerce, value growth of the fast-moving consumer goods sector stood at 6.3 percent in the January-March period. That compares with 7 percent in the previous three months and 13.8 percent a year ago.

While in metros the sector grew at 4.8 percent during the reported quarter, value growth in rural India— that contributes 36 percent to overall spends on FMCG—was at 4.9 percent. The sector’s value growth in towns with a population of 1-10 lakh stood at 6.1 percent and at 6.5 percent in the rest of urban India with less than 1 lakh people.

• Value growth of FMCG goods sold in South India fell to 8.8 percent during the first quarter from 10.4 percent in the October-December period and 11.1 percent a year ago.
• East India was the most impacted with value growth at 2.6 percent against 5.6 percent in the preceding quarter and 14.9 percent last year.
• Value growth in north India stood at 4.7 percent against 5.7 percent in the preceding three months and 15.1 percent a year ago.
• West India saw 5 percent value growth compared with 4.6 percent in the quarter ended December and 12.4 percent in the year-ago period.

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Outlook

• Nielsen India cut its growth forecast for the FMCG sector, including e-commerce, to 5-6 percent for the year from 9-10 percent earlier.
• Growth in the second half of the year is expected to be marginally higher than the first half.
• The lockdown to prevent the Covid-19 spread, rising unemployment and reduced tax revenue and increased government spending impacting fiscal deficit in 2020 are the headwinds for the FMCG sector this year.
• Possible government stimulus, cheap crude oil and low inflation are tailwinds for the sector.