Price Hikes, Better Demand Aid Consumer Goods Makers In March Quarter: Nielsen

India’s consumer goods makers saw their value grow over the year earlier for the third straight quarter as prices, especially of food staples, increased and demand improved.

The fast-moving consumer goods industry’s value—a combination of volume and revenue—rose 9.4% year-on-year in the three months ended March, NielsenIQ’s Retail Intelligence said. Traditional trade channels saw double-digit growth during the period, while that of e-commerce’s normalised down to single digits, the market researcher said in a report.

“The recovery in Indian FMCG industry growth that we had seen in the last quarter has strengthened further in January, February and March. This is backed up by staples, essential non-foods and indulgence categories,” Diptanshu Ray, South Asia lead, NielsenIQ, was quoted as saying in the report. “The beginning of the second quarter, however, may bring some new dimensions as the situation is dynamic across the country.”

There was uniform consumption growth for both foods and non-foods in the quarter (about 4.5% versus year ago), Nielsen said. The foods basket witnessed stronger growth due to pricing uptick, mainly in staples categories such as edible oils and packaged tea. Non-staple food items like biscuits, coffee, cheese and ketchup, too, witnessed an increase in consumption as people continued to stay home.

But non-foods categories saw a dip in average pricing as the contribution of larger packs in consumer basket increased and offers/discounts rose in essential home and personal care categories, the market researcher said.

“Traditional trade channels have consolidated share in the [FMCG market] pie in recent months, while the organised channels — big box modern trade stores and e-commerce — tapered down,” Sameer Shukla, customer success leader, NielsenIQ South Asia, said in the report. Lockdowns due to the second Covid-19 wave, according to him, will be critical for manufacturers, retailers and planners to gauge the interplay of channels, especially in the metropolitan cities, and plan with agility.

• Consumption in metropolitan cities grew for the second straight quarter. Value rose 2.2% in the January-March period.

• Value growth for rural markets stood at 14.6% in the reported quarter compared with a 2.9% rise a year earlier. It remained flat over the preceding three months.

• Value growth of traditional trade channels grew 11.4% over the year earlier in January-March period.

• E-commerce grew at 15.7% during the period.

• Modern trade contracted 8.3% in the quarter ended March.

Opposing Trends

Retailers are willing to expand product categories but they are doing so without putting any extra burden on stocking space or capital requirements, according to NielsenIQ.

To make room for more categories, retailers are prioritising on two levels — by reducing the number of stock-keeping units per category, and stocking fewer units for each SKU, it said.

This phenomenon, according to the market researcher, would have substantial implications for FMCG manufacturers in terms of which SKUs to push for, and finding the optimum frequency for servicing stores.