Inflation keeps grip on FMCG, volumes dip again in July-September

Consumption of packaged consumer goods in the country fell for the fifth straight quarter in July-September, when the fast-moving consumer goods (FMCG) market shrank 0.5% on-year by volume - driven by food products - amid rising prices.

Urban sales showed some improvement, falling 0.8% in the September quarter against a 4% decline in the previous two quarters. However, the rural market, which was growing until last quarter, fell 0.2% on-year, data from global consumer research firm Kantar Worldpanel (formerly IMRB) show. Volume indicates the unit number of products bought or consumed.

"If rural decline persists, for which there is a good chance, then India's return to growing FMCG might be delayed by a quarter or two," said K Ramakrishnan, South Asia managing director of consulting firm Kantar.


In the past decade, sales of branded daily needs in the nation of 1.3 billion people have increasingly relied on rural India - home to more than 800 million people whose purchase behaviour is largely linked to farm output.

Decline in the broader FMCG market was entirely driven by food and beverages (F&B), which fell 1.3% led by atta and edible oils. However, demand for personal care products grew 4.5%, while household care products expanded 1.1%, Kantar data showed.

"The demand environment remains taxing, marked by unprecedented inflation (and) consequential impact on consumption," Sudhir Sitapati, managing director, Godrej Consumer Products, told analysts on Tuesday.

Hope for Second Half
(There are) "aggressive monetary tightening measures from central banks globally, resulting in strengthening of the dollar. Despite this, our prognosis for FY23 broadly remains unchanged on double-digit sales growth, with low single-digit volume growth," said Sitapati of Godrej Consumer Products.

Companies remain hopeful that the second half of the year could recover on the back of government interventions, reasonably good monsoon, and higher crop realisation.

"It has not been all gloomy, as urban and premium discretionary categories fared reasonably well," Saugata Gupta, managing director of Marico, had told analysts last week. "Moderation in global commodities also bodes well for the sector."

While prices of both crude and palm oil have cooled down from their yearly high, the rupee's depreciation against the US dollar could put pressure on companies' plans for price cuts.

"India has been relatively more resilient...you've seen the rupee move so quickly in the past few days," Sunil D'Souza, chief executive, Tata Consumer Products, told analysts in an earnings call last month. "Rural areas continue to be stressed. We were hoping that monsoons and the festive season would pick things up. We have seen some good news at the end of September, (and) October has started off decently. But how much of it is festival, how much of it is structural, I think (it's) too early to tell."