For Third Time This Year, Nielsen Cuts Forecast For FMCG Sector
The market researcher has cut the forecast for India’s consumer goods makers to -3% to -1%.
India’s fast-moving consumer goods industry is expected to contract more than expected in 2020 owing to the lasting effect of severe disruptions in the quarter ended June as the world’s harshest lockdown to curb the Covid-19 outbreak clobbered demand, according to Nielsen India.
The market researcher has cut the forecast for India’s consumer goods makers to -3% to -1% from the earlier projection of -1% to 1%. This is the third time Nielsen India has made a downward revision to the consumer sector’s outlook this year. At the start of 2020, the forecast was pegged at 9-10%, which was later revised to 5-6% and then to -1 to 1%.
The industry contracted by around 19% by value in the first quarter as only essentials were allowed to be manufactured and sold, Nielsen India said. That came as companies faced supply-chain and labour issues as the lockdown forced workers to migrate back to hinterlands. Demand improved after the nation—fighting a rare recession—restarted most activities to boost sentiment and growth. Consumption was partly aided by rural demand. Still, that may not have aided recovery for 2020.
July-September Highlights
- India’s FMCG sector grew 0.9% in value as the economy revived.
- Store closure days reduced to 3 from 9 days in April-June quarter.
- Demand for consumer goods grew 10.6% in rural India.
- Staple consumption grew 11%.
- Home and personal care categories witnessed a sequential improvement in demand.
- Modern trade was impacted as stores in malls continued to remain shut.
- E-commerce continued to grow and now 3.1% of all FMCG sales take place online.
The report also noted that the consumer wallet is shrinking and consumers are opting for lower-priced products. The movement towards affordable brands is more pronounced in the food category.
Small FMCG manufacturers witnessed a higher growth compared to medium and large FMCG players in the quarter. Small FMCG players witnessed a value growth of 11.3% while medium-sized players witnessed a growth of 1.3% compared to a contraction in the previous quarter. Large FMCG players performance improved sequentially to -2.4%.
After announcing its September quarter results, Sanjiv Mehta, chairman and managing director of Hindustan Unilever Ltd., said: “Rural markets have been resilient but demand in urban markets, especially metros has been muted.” The company said while the worst is behind it, it’s cautiously optimistic on demand recovery.
Britannia Industries Ltd., too, said while the government has ended the lockdown, it will take a while for the situation to normalise.
The company, while announcing its second quarter earnings, said it’s watching macroeconomic factors, changes in laws, evolving consumer behaviour and is framing its medium-term strategy to deal with the dynamic environment.
