FMCG sales remain flat amid trade restocking

Mumbai: India's fast-moving consumer goods (FMCG) market grew marginally at 0.5% by value in October compared to September amid heavy stocking by kirana stores during the festive period.

Sales of groceries had fallen 10% month-on-month in September, according to the latest report by retail analytics platform Bizom.

Companies aggressively restocked shelves last month in the run-up to Diwali which translated into a 6% growth in the first three weeks of October, but sales fell sharply by 15% in the last week after the festive season. "Trade stocking pre-festive typically goes up, so does consumer buying. The drop post festive [season] is normal, particularly in the regions where the festive season is big. However, overall October sales have been slightly below expectations. With inflation stabilizing, we expect consumer pickup to be slightly better in the next two months," said Neeraj Khatri, chief executive, Wipro Consumer Care, India & Saarc region.

Consumer inflation hit an all-time high in April in the wake of the Russia-Ukraine war as companies increased product prices by 15-20% or cut down pack sizes over the past year. In September, it spiked more than expected to a five-month high. The decline in the consumer goods segment is more pronounced in rural areas, and companies said demand could recover in the second half of the financial year due to moderation in inflationary pressures and normal monsoon although it will depend on the kharif output.

Experts said there was a sharp difference between pre and post-festive sales, which could either indicate inventory pileup or impact of inflationary pressures.

"In the short term, this could indicate that there are excessive stocks lying at kirana shelves that will need to be liquidated first. However, if this trend continues longer, then consumer companies would need to relook at measures to drive sales consumption by offering greater value to consumers for them to overcome their buying resistance as a result of inflation," said Akshay D'Souza, chief of growth and insights at Mobisy Technologies, which owns Bizom, a platform that transacts with 7.5 million retailers. Companies said the post Diwali period is crucial to assess how consumers are reacting to inflation and the effect of the agri income from the kharif crop, especially in rural areas.

"I always tell the team that we should not just look at the Diwali sales but also post Diwali, because that would give you a real indication of offtake. If the trade has bought in optimism during pre-Diwali and its output doesn't happen post Diwali, then you see an ebb," Sanjiv Mehta, Hindustan Unilever's managing director told ET last month.