FMCG Ranking Report 2020 – FMCG News

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FMCG likely to grow 9-10% in 2020: Nielsen

More than a dozen categories within daily household, personal and food products expanded at a significantly slower pace from 2020 indicating weak consumer demand despite price cuts to accelerate growth.

Mumbai / New Delhi: India’s fast-moving consumer goods (FMCG) market is expected to grow 9-10% in the January-December period, matching the expansion rate in 2020, according to market researcher Nielsen, which said the rural slowdown has bottomed out and demand will stabilise.

Growth slowed to 9.7% growth last year from 13.5% in 2020. It fell to its slowest in at least three years to 6.6% in the December quarter from 15.7% a year ago.

“A mix of macroeconomic factors and channel and zone factors driven by manufacturers, coupled with consolidation of smaller players, have been instrumental in the slowdown,” said Prasun Basu, South Asia zone president, Nielsen Global Connect.

More than a dozen categories within daily household, personal and food products expanded at a significantly slower pace from 2020 — growth rates in many segments nearly halved — indicating weak consumer demand despite price cuts to accelerate growth. Soaps, shampoos, biscuits, tea, hair oil, skin cream and toothpaste, among other categories, saw growth fall to low single digits in 2020 compared with double digits in the previous year, industry executives said.

“The year 2020 was a difficult one when value and volume were both compromised,” said Mayank Shah, category head at Parle Products. Consumers became thrifty as the economy slowed, restricting themselves to spending on essential purchases, he said. Rural demand—which accounts for about a third of the market and had been outpacing urban sales—was hit by lower farm incomes and liquidity constraints that have squeezed the wholesale channel.

Nielsen said the final tranche of Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) payments, improved ease of doing business ranking to 63 from 77, expectations of budget tax measures and a steady exchange rate contribute to a stable consumption outlook.

“There has been a slowdown in consumer demand, more so in the second half of 2020. We expect a gradual recovery over the next three to six months,” said Sameer Shah, head of finance at Godrej Consumer Products.

Companies also see a shift to branded products from the unorganised market, which in several commoditised segments account for more than half the overall consumption. According to the Nielsen report, nearly 5,500 manufacturers, or about 14% of all consumer firms, exited in 2020, against 4,200 or 11% of the overall universe a year ago.

“Following the implementation of GST (Goods and Services Tax), a lot of unorganised players have exited the market across different FMCG categories,” said ITC executive director-FMCG, B Sumant. “As a result, there has been a clear shift in consumption trend from unbranded to branded products.”

Consumer products firm Marico, in its quarterly update earlier this month, said December quarter consumption trends belied expectations of a revival in sentiment on the back of good monsoons and the announcement of various government measures. Unilever chief executive Alan Jope said last month that these measures may take time to have an effect and that its Indian business could start to pick up in the second half of 2020.

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The government’s steps to revive the economy will have a knock-on effect on consumption, said Crisil. “Next fiscal, growth in rural FMCG revenue will recover to 11-12% from lows of about 8-9% in fiscal 2020, largely driven by better agriculture GDP growth. Besides, higher spending by the government on rural infrastructure could benefit rural incomes and thereby demand for FMCG products,” said Anuj Sethi, senior director, Crisil Ratings.

FMCG industry to grow 9-10 pc in 2020: Nielsen

The FMCG industry registered a growth of 9.7 per cent in 2020, which included e-commerce, said data analytics firm Nielsen in the report titled ‘India FMCG Growth Snapshot’.

The full year 2020 forecast is stable at 9-10 per cent, it added.

“2020 has been a tough year for the FMCG industry with over four point decline, but we do see it stabilising in the last quarter of the year. However, 2020 offers a stable outlook for the industry arresting the 2020 decline,” Nielsen Global Connect South Asia Zone President Prasun Basu said.

In the fourth quarter (October-December) of 2020, the FMCG industry reported a sales growth of 6.6 per cent and it was 7.3 per cent with e-commerce channels, which according to the report indicates an “arrest” as against sharp slowdown witnessed in the previous quarters.

For the full year 2020, FMCG growth slowed down to single digit in 2020. It was led by the rural market, and growth slipped to nearly half that in the previous year.

Comparing zones over the one-year period, while northern and western regions were the most affected, the southern region sustained its growth levels, it added.

Inflation in December 2020 touched a 5-year high of 7.3 per cent. The trajectory would be on a declining trend, and is expected to end in the 4-5 per cent range for this year, the report said.

Additionally, rural inflation has touched and is at similar levels with urban inflation on account of rising food prices, it added.

With new crops coming in and onions supply stabilising, inflation is expected to go down in coming months, the report said.

Currently, continuing efforts to boost consumption and growth, the government has announced a USD 15-billion infrastructure pipeline for the next five years, it added.

With the third and final tranches for the year of the Pradhan Mantri Kisan Yojana being released, USD 1.7 billion is expected to flow into the economy, the report said.

“The Budget 2020 is also expected to bring respite to the masses through tax cuts and additional benefits and may be a reason for cheer,” it added.

Other factors that could impact trajectory of FMCG growth is improvement in India’s global ranking in the World Bank’s ‘Ease of Doing Business’ Index from 77 to 63, coupled with proposals to allow higher FDI in select sectors, may lead to higher amount of investments coming into the country, the report said.

Disposable income, consumer sentiment and thereby the trajectory of FMCG growth would also be impacted by factors such as telecom sector having an overhang on the larger growth picture, it added.

“With BS-VI norms coming into effect in 2020, the auto sector may start seeing greater stability,” the report said.

Macroeconomic policies coupled with inflation-GDP trajectory, manufacturer actions and consumer sentiment are expected to lead to money in the hands of consumers, thereby fuelling consumption, Nielsen South Asia Data Science Lead Nitya Bhalla said.

“Our forecasts for Q1’20 is 8-9 per cent and for the full year 2020 is 9-10 per cent, similar to the year gone by,” she added. AKT KRH HRS

(This story has not been edited by Business Insider and is auto-generated from a syndicated feed we subscribe to.)

FMCG likely to grow 9-10 per cent in 2020: Nielsen

IBEF: January 23, 2020

According to market researcher Nielsen report, India’s fast-moving consumer goods (FMCG) market is expected to grow 9-10 per cent in the January-December period, matching the expansion rate in 2020. Since the rural slowdown has bottomed out, demand is expected to stabilise.

The growth witnessed a slow down to 9.7 per cent growth last year from 13.5 per cent in 2020. The growth was slowest in at least three years to 6.6 per cent in the December quarter from 15.7 per cent a year ago.

“A mix of macroeconomic factors and channel and zone factors driven by manufacturers, coupled with consolidation of smaller players, have been instrumental in the slowdown,” said Mr Prasun Basu, South Asia zone president, Nielsen Global Connect.

In 2020, the growth was slow for more than a dozen categories within daily household, personal and food products from 2020 with many segments witnessing growth rates reducing to half. This indicates that the consumer demand was weak despite price cuts to increase growth. The growth rates of the soaps, shampoos, biscuits, tea, hair oil, skin cream and toothpaste, among other categories, fall to low single digits in 2020 as compared with double digits in the previous year, industry executives said.

“The year 2020 was a difficult one when value and volume were both compromised,” said Mr Mayank Shah, category head at Parle Products.

Consumers were cautious to spend as the economy slowed, limiting themselves to spending on essential purchases only, he said. The rural demand which accounts for about a third of the market and had been outperforming urban sales, witnessed a slow-down. It was majorly affected because of lower farm incomes and liquidity constraints, squeezing the wholesale channel.

Nielsen report also stated that the stable consumption was on the back of the final tranche of Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) payments, improved ease of doing business ranking to 63 from 77, expectations of budget tax measures and a steady exchange rate.

“There has been a slowdown in consumer demand, more so in the second half of 2020. We expect a gradual recovery over the next three to six months,” said Mr Sameer Shah, head of finance at Godrej Consumer Products.

A shift towards branded products was seen from the unorganised market by the companies, which in many commoditised segments account for more than half the overall consumption. According to the Nielsen report, nearly 5,500 manufacturers, or about 14 per cent of all consumer firms, exited in 2020, against 4,200 or 11 per cent of the overall universe a year ago.

“Following the implementation of GST (Goods and Services Tax), a lot of unorganised players have exited the market across different FMCG categories,” said Mr B Sumant, ITC executive director of FMCG. “As a result, there has been a clear shift in consumption trend from unbranded to branded products.”

According to Marico, a consumer products firm in its quarterly update earlier this month, the consumption trends in December quarter contradicted the expectations of a revival in sentiment on the back of good monsoons and the announcement of various government measures. Unilever chief executive Mr Alan Jope said last month that it might take time to see the effects of these measures and its expected that company’s Indian business could start to pick up the pace in the second half of 2020.

According to Crisil, the government’s steps to restore the economy will have a knock-on effect on consumption. “Next fiscal, growth in rural FMCG revenue will recover to 11-12 per cent from lows of about 8-9 per cent in fiscal 2020, largely driven by better agriculture GDP growth. Besides, higher spending by the government on rural infrastructure could benefit rural incomes and thereby demand for FMCG products,” said Mr Anuj Sethi, senior director, Crisil Ratings.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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