FMCG slowdown gets worse in Q2 as consumer sentiment remains tepid

Topics FMCG companies | FMCG sector | FMCG

India’s fast-moving consumer goods (FMCG) market slowed to a five-quarter low in the July-September (Q2) period as consumer sentiment remained tepid. 

The Nielsen data quoted by industry executives indicates that value and volume growth in Q2 have come down to levels of 5 per cent and 3 per cent, respectively, as against a moving annual total (MAT) of 9 per cent and 7 per cent for the market. MAT is calculated over the last 12 months. In April-June (Q1), the domestic FMCG market reported volume and value growth of 6.2 per cent and 10 per cent, respectively, while in January-March, volume and value growth stood at 9.9 per cent and 13.4 per cent.  

In a post-results press conference on Monday, Hindustan Unilever (HUL) Chairman and Managing Director Sanjiv Mehta admitted there was no demand pick-up and that the key contributor to the slowdown was rural distress. 

“Rural growth was ahead of urban growth by 1.3 times earlier. It is now only 0.5 times urban growth,” Mehta said, pointing to the pain in rural areas.

While analysts, companies, and independent experts have for some time now pointed to rural distress, a sharp deceleration is something that few anticipated, coming at a time when much of India battled floods during July-September.

Mehta said the longer monsoon season this year, which resulted in flash floods in several parts of the country, had disrupted demand as well as logistics and supply chain, especially in rural areas. “This may impact rural growth rates even further in the near term, though I remain optimistic from a medium-term perspective,” he said.

Sector analysts admit the going will be tough for companies in Q2, an admission that some firms have already made in their recent quarterly updates.



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