FMCG sales growth slows in India

23 July 2012

NEW DELHI: Pressure on rural and middle class consumers has caused a decline in the volume sales growth of fast-moving consumer goods in India, figures from Nielsen, the research firm, suggest.

The company estimated that volume category sales across the country rose by 2.2% in the 12 months to June 2012, versus 8.6% the previous year.

More specifically, these totals hit 0.83% and 6.5% respectively in rural regions, alongside reaching 3.1% and 10.2% in turn when discussing urban areas.

Looking at value sales, however, Nielsen reported that packaged goods returns leapt by 15% in the same period, largely as a result of price inflation.

"In a buoyant economy, the value growth in rural India was at 17%, and now in a challenging environment, value growth is at over 15%. This means that there is good consumption available," Roosevelt D'Souza, executive director at Nielsen, said. "But marketers don't understand rural [India] and need to read it better."

Harminder Sahni, managing director Wazir Advisors, the consultancy, agreed, saying: "Companies haven't really innovated for the rural consumer. Now that the soaps, shampoos and detergents [market] is well-penetrated, growth is stagnating as the rural consumer has not got on to the next phase of consumption."

Such a slowdown would be broadly in line with that experienced by the Indian economy, where growth stood at 6.5% for the 12 months to March 2012, off from 8.4% year on year. A late monsoon season with below-average rainfall has further dented consumer confidence.

However, results from a survey conducted by Mint, the newspaper, pointed to a brighter picture for brand owners, with average figures from six brokerages estimating that packaged goods sales surged by 16-18% and profit increased by 17-37% in the June quarter.

"Most listed companies saw double-digit volume growth in the past year and our expectations are for another quarter of similar growth," said Anand Mour, an analyst at banking and brokerage group Ambit Capital.

Packaged goods manufacturers also remain largely upbeat, with Emami reporting that volume growth held steady to its three year average despite a price increase in the 7-8% range.

Adi Godrej, chairman of Godrej Consumer Products, similarly reported that the firm is not "seeing any slowdown in FMCG demand, urban or rural."

Data sourced from Livemint; additional content by Warc staff