market saw a decline of 19 per cent in April-June as the quarter saw the full impact of the Covid-19 pandemic and lockdown, which began on March 25. While the month of June did see a rebound, led by growth in rural areas, companies
have been largely cautious in July-September, saying that localised lockdowns did impact their businesses in July, though August-September was better as the economy unlocked.
The Reserve Bank of India has said that consumer confidence will gradually improve over the next twelve months as the economy slowly but steadily gets back on track. In its October survey, the central bank had said that its future expectations index had improved for the second time in a row, though the current situation index remained weak.
Diptanshu Ray, lead, retail intelligence, South Asia, Nielsen Global Connect says that volatility remains high in the FMCG market, prompting the agency to desist from making projections for calendar year 2021.
"While there are positive indicators such as the likelihood of a vaccine next year, the situation remains dynamic," he said. Yet, some economists and analysts say that urban FMCG growth will bounce back next year possibly by the July-September period as people come to terms with the virus. This is expected to push the domestic FMCG market back onto the growth path, since urban sales contribute 62 per cent to overall FMCG sales. Rural contributes 38 per cent to overall FMCG sales.
"Most are assuming that a vaccine will be launched by June next year, though the government is saying it will come by the March quarter," G Chokkalingam, founder, Equinomics Research and Advisory, said. "However, the emergence of a vaccine will put businesses and consumers at ease especially in the cities, where the impact of the pandemic has been more," he said.
While metros and tier 1 cities reported a decline of 9.6 per cent and 5.1 per cent respectively in Q3, rural areas reported a growth of 10.6 per cent in the period, Nielsen said. This was led by the government's rural push and welfare measures to boost employment and farm incomes.
Packages staples and hygiene categories drove growth in rural areas, Nielsen said, as the pandemic resets priorities across the urban-rural divide. The focus on health and hygiene has pushed FMCG companies
to launch as many as 3,000 new products between April and September, with new launches in non-food higher than food for the first time, Nielsen said.
The share of e-commerce too, the market researcher noted, had increased from 2.5 per cent to 3.1 per cent in the first nine months of the 2020 calendar year, pointing to the growing importance of the online channel. In metros, the share of e-commerce, Nielsen said, had increased from 6.4 per cent to 8.6 per cent, with share expected to grow further in the months ahead.