KOLKATA | MUMBAI: Consumer goods market for essentials, groceries, household products, smartphones and electronics are seeing further moderation in growth, belying expectations of a revival during quarter ended March.
The fast moving consumer goods (FMCG) market grew 1% during January, a sharp fall from 2.4% the same month, a year ago according to a latest study by Kantar Worldpanel, a global consumer research firm owned by communications and advertising giant WPP. In fact, unlike previous quarters where slowdown was largely led by rural markets, latest data revealed that urban growth, at 0.2%, dragged down the entire segment even as hinterland consumption remained that same at 1.8%.
Smartphone sales trackers have revised downward their sales estimates for the industry, while consumer electronics companies for the first time said sales would take a hit in both the current quarter as well as in April-June due to the coronavirus outbreak. The virus could also weigh on sales of FMCG, although it is too early to predict, say companies.
“We will have to wait-and-see how the situation evolves. Things are too dynamic and uncertain at this stage to call out any trends. A lot will depend on how long this crisis lasts for. We will continue to focus on enhancing our distribution and launch affordable innovations to drive growth,” said Vivek Gambhir, managing director, Godrej Consumer Products.
Several states have scaled up precautionary measures to curb the spread — from closing public places, educational institutions, pubs and restaurants, cinema halls to shuttering malls till month-end. This, in turn, could hurt out-of-home and impulse consumption across categories, said Marico CEO Saugata Gupta. “All depends on how soon this thing dies down since there are possibilities of a long-term impact,” he added.
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Latest numbers obtained from industry officials quoting Nielsen, suggested that growth in several categories such as soaps, laundry, toothpaste, shampoo, skin creams and biscuits more than halved during January and February, compared to a year ago. (see graphic) Despite sales soaring since a week, especially for food items, due to panic buying, it will still be difficult to compensate for the tepid growth companies witnessed over the past two months.
“The growth will surely improve but will not reach the levels that we had a year ago. Also, we have historically seen a lull after such massive rush to buy consumer staff and we have to brace for such anomaly,” said Mayank Shah, category head at Parle Products.
Analysts have started to re-rate consumer stocks with lower sales guidance, too. Electronics and smartphone makers say the issue is more demand-driven now compared to problems on the supply side, which the companies faced during lockdown of China, when component availability was biggest concern.
“Initially we thought smartphone sales will be better in March with the government increasing GST on smartphones by 6% which would come into effect from April. But smartphone purchase is no longer on top of the mind for consumers,” said Navkendar Singh, research director at International Data Corporation that estimates sales to be down by 5-10% in January to March Counterpoint Research too revised its shipment outlook from 10% decline earlier to 15% as compared to same period last year. The firm's senior analyst Karn Chauhan said if the COVID-19 situation remains critical, the smartphone market will be further impacted especially in the first two months of April-June quarter. In 2019, the smartphone market grew by 8%.
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For refrigerators, washing machines and air-conditioners, the industry is estimating similar deep impact on sales. The industry, which was expecting 12-15% growth in January to March quarter due to buoyant sales in first two months, now expects a flat quarter due to 15-20% decline in volume sales in March, said Kamal Nandi, president of industry body Consumer Electronics and Appliances Manufacturers Association (CEAMA). In 2019, sales growth was the best in four years at 9%.
CEAMA is fearing similar degrowth in April, too, which alone contributes 15% of the industry’s annual sales.
