FMCG demand slows in rural markets for third successive quarter in Q1 2022: NielsenIQ

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The demand for fast-moving consumer goods in rural areas slowed down for the third consecutive quarter, with the volume slipping to 5.3 percent in the January-March period, said NielsenIQ’s FMCG snapshot for Q1 2022.

The decline was the steepest in the last three quarters even as the FMCG industry saw a 6 percent year-on-year growth in the country during Q1, the survey released on June 1 said.

“The Q1 2022 quarter witnessed 6.0 percent growth for FMCG in India over last year led by double-digit price growth, and consequently negative volume growth, similar to the last quarter (-4.1 percent in JFM’22 vs YA),” said the findings, referring to the March quarter as compared to the year-ago period.

“A decline in consumption is echoed across all zones and the town classes but more prominent in rural markets.”

According to NielsenIQ, the south and north zones witnessed a more than 5 percent volume decline. At 11.9 percent, rural markets witnessed a steeper price increase compared to 8.8 percent for urban areas, it said.

The survey also indicated an increase in the exit of small manufacturers in Q1 due to high input cost pressures, and not being able to pass on the costs to the consumers.

“In continuation from last year, macro-economic indicators are still guiding consumption patterns for the Indian consumer, and they are feeling the impact of the price increase , especially in the food and essentials categories," said Satish Pillai, managing director India, NielsenIQ.

“Although global macro factors persist, the impetus by the government, if supported by the normal monsoon in the country would be encouraging. Within this environment, retail trade continues to be optimistic, and traditional trade shopkeepers have maintained stock levels as well as assortment”, he added.

Modern trade, however, has shown signs of stability in recent quarters, with volume growth of 5.3 percent in Q1, it said.

Traditional trade saw a 4.9 percent volume decline led by a shift towards smaller packs, while e-commerce grew 5.6 percent, indicated the report.

In categories, non-food segments witnessed a volume decline as consumers prioritised food purchases. Non-food categories’ volume dipped by 9.6 percent, while food saw a 1.8 percent fall in growth in Q1, as per NielsenIQ survey.

“Within foods, impulse beats the slowdown (positive volume growth of 1.5 percent) with consumers focusing on smaller packs in the category seen in salty snacks, chocolates, and confectionary. The staples product basket with categories such as refined and non-refined edible oil, vanaspati, packaged atta showed a nearly 15 percent price increase,” it revealed.

“Consumers are scaling back more on discretionary spends within the non-food categories. Overall, there is an evident shift by consumers to smaller pack sizes to manage external factors for both foods and non-foods”, said Sonika Gupta, customer success lead (India), NielsenIQ.