No Growth For FMCG Companies In 2020, Says Nielsen India
April and May were the worst hit months as sale of consumer goods contracted 27.7%. June showed signs of a recovery.
India’s fast-moving consumer goods industry is expected to register no growth in sales in 2020 on account of the Covid-19 pandemic, lockdowns and the resultant demand destruction, market research firm Nielsen India said in its report on the industry released today.
At the start of the year the research agency had pegged the industry to grow at 9-10% which it then revised lower in April to 5-6%.
Nielsen now expects the industry’s annual growth to remain in the range of -1 to 1% on the back of a 17.1% decline in the April-June quarter (including e-commerce) as only essential goods were permitted to be sold, and also due to severe disruptions in distribution.
April and May were the worst hit as sale of consumer goods contracted 27.7%, with growth reviving to 4.5% in June as the nation began its first phase of unlocking commercial and social activity..
In the corresponding quarter last year, the industry grew at 10.8%.
June Highlights
- Rural India witnessed value growth of 12% after witnessing a contraction in the preceding two months.
- Demand for consumer goods in metros saw a contraction of 4%.
- North and east India, with larger rural population and fewer virus cases, witnessed a faster recovery. Demand for soaps, toothpastes and biscuits was up 8% in north and 5% in east in June.
- Demand in western India was hit the most in April and May, shrinking by 33%. That narrowed to -2% in June.
- Modern trade witnessed a spike in sales towards the end of March and early April as consumers rushed to stores to stock-up.
- Traditional trade and e-commerce bounced back strongly in June.
Most consumer goods companies have emphasised that rural sales growth is currently outpacing urban as a normal monsoon heralds a bountiful crop. At a post earnings press briefing last week, Hindustan Unilever Ltd.’s Chairman and Managing Director, Sanjiv Mehta said rural India is growing a bit faster than urban. Britannia Industries Ltd.’s Managing Director Varun Berry told BloombergQuint in a recent interview that demand for its products from rural India is expected to outpace urban demand by about 2-2.5 times.
Neilsen expects the second half of the year to witness a further revival in consumer goods sales due to the festive season. “The lipstick effect would continue especially in Q4 2020. Food categories too are expected to see a higher growth due to this,” the report stated.
The Lipstick effect describes how cash-strapped consumers tend to purchase small indulgences as mood lifters.