Rural areas growing at 1.5x urban markets: Nielsen

Below is the verbatim transcript of Vijay Udasi's interview with Sonia Shenoy and Anuj Singhal on CNBC-TV18

Sonia: In this particular quarter we have seen some mixed volume growth trends for fast moving consumer goods (FMCG) companies, volumes for paint companies were weak while volumes for some of the FMCG companies remain at best resilient. What are the trends on the ground which you are picking up at this point?

A: It has been a tough year for Indian consumers. I would call it as a double whammy effect on the Indian consumers more specifically because on one hand we are seeing the food inflation has shown no signs of coming down to a certain extent and obviously there are uncertainties about the job prospects as has been seen by the Nielsen Consumer Confidence Index plus the state of the economy. Given all these factors clearly we have seen that the FMCG growth trend per se have come down. If I were to give you a comparative index, from a Nielsen perspective, the overall FMCG market last year was close to 18 percent and now that has come down to 9.5 percent as far as the overall FMCG is concerned.

The urban consumers to a certain extent if you were to look at us has got impacted more as compared to anywhere else wherein the urban consumption growth has come down to close to 7.5-8 percent essentially. In rural consumption, there is still some story around it wherein the overall rural FMCG consumption continues to grow at about 12.5 percent. If you were to take a mix of this, you would see that yes, there is a marked slowdown which has happened across and it continues as we go long into 2014 essentially to a certain extent because of this uncertainty which is happening across from the economic perspective.

Anuj: Just wanted to take this discussion a little micro. Which specific areas or categories are witnessing a slowdown because some data points reveal that maybe consumer durables could be witnessing a double digit decline for two consecutive years?

A: Let me break this entire consumption into two parts essentially. First and foremost as I mentioned across, the rural is the area where we continue to see healthy double digit growth of 12.5 percent, which in some sense if I were to look at, the rural market is going 1.5 times that of the urban markets. Even within the rural areas, the consumer is withholding purse strings and in some sense are trying to tighten purse string more among the discretionary non-food segments specifically in personal care, general segments, men segment, women segment as well as home care segment.

Food growth in rural per se is still growing at 16.5 percent and that is a double digit healthy growth. But if you were to look at further patterns even there, obviously you cannot paint everything with the same brush. Even within the food angle if you were to look at from just a rural perspective, this 16.5 doesn’t mean that every single segment within the food category is growing at the same level. Even in rural areas you are seeing rural consumers cutting down his spends on discretionary items even within the food segments. That is number one.

Second is it is trying to either downgrade to cheaper products, move into smaller pack sizes or move into cheaper alternatives. A simple example of that is seen in the packaged grocery segment in rural areas where in 2012 the growth rate was close to 20 percent and now it has come down to 11 percent. You can clearly see the consumer is moving out to either cheaper alternatives or moving into unbranded. Likewise, if you were to look at urban consumers or even overall the FMCG segment you see food per se as a segment has slowed down considerably lesser as compared to the non-food segment. Even in the non-food segment if you were to look at, the segment such as personal care, men’s grooming per se have taken a bigger impact as compared to some of the other segments essentially.