Dip in rural demand to slow FMCG growth rate around 9-10% in 2019: Nielsen report

New Delhi: The FMCG sector in India will face a slowdown in 2019 with a growth rate of around 9-10 percent impacted by a dip in demand, particularly the rural, according to a report.

The FMCG growth rate for the first half of 2019 is around 12 percent, which is lower than the previous forecast of 13-14 percent, the report by data analytics firm Nielsen said.

“Based on an analysis of key factors, a revised forecast for the year-end of 2019 puts all India FMCG growth to be in the 9-10 percent range,” the report ‘India FMCG Growth Snapshot’ added.

In 2018, FMCG sector had a growth rate of 14 percent. The sector is estimated to have around Rs 4.2 lakh crore sales.

According to the report, the demand is impacted by rural sales, which contribute around 36-37 percent of the total FMCG sales.

 Dip in rural demand to slow FMCG growth rate around 9-10% in 2019: Nielsen report

Representational image. Reuters

In rural sales, 60 percent spend on FMCG is on food items which include salty snacks and biscuits, said Sunil Khiani, Nielsen India Executive Director Client Solutions.

“Sales in urban areas are also impacted but the decline is almost twice in rural areas,” he said.

Earlier, the growth rate of rural sales was faster than urban markets led by factors such as increasing affordability, availability, and demand.

“However, rural growth is slowing down double the rate of urban in recent quarters. This has brought rural growth closer to urban growth in the second quarter of 2019,” it added.

Nielsen expects food categories to grow at a higher rate in the coming quarters at 10-11 percent and personal care and home care category at 7-8 percent.

“The outlook for next quarter stands at 7- 8 percent and H2 2019 in the range of 8 percent,” the report said.

According to the report, in April-June 2019, FMCG value growth has dropped to 10 percent “inching towards a slowdown”.

“The FMCG growth trend is majorly dampened by volume led growth which has also moved 3.7 percentage points down from 9.9 percent in Q1 (January-March) to 6.2 percent in Q2 of 2019,” it added.

According to Khiani, April-June 2016 had the slowest growth rate of 2.4 percent.

“This is the third consecutive slowdown in the sector after Q3 of 2018 which has 16.2 percent growth,” he added.

FMCG growth trends continue to see a consistently high price-led growth of 3.8 percent for the first two quarters of 2019.

“At the beginning of the year, we saw softening driven by essential and impulse food categories. However, this quarter has witnessed a slowdown across all food as well as non-food categories with salty snacks, biscuits, spices, toilet soaps, and packaged tea leading the slowdown,” it added.

According to the report, the slowdown in the FMCG sector is mainly driven by North and West Zones where growth has come down to single-digit in April-June quarter.

States as Haryana, Madhya Pradesh, Uttar Pradesh, Maharashtra “are leading the slowdown”, it added.

Updated Date: Jul 17, 2019 15:20:53 IST

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