FMCG Sector To Return To Double-Digit Growth This Year: Nielsen

The market research firm Nielsen said that the fast moving consumer goods industry (FMCG) will return to double-digit growth in 2022 on the back of value growth which is a combination of volume and price-led expansion and revival of some consumption. It has estimated the sector’s value growth at 8-10 per cent for the year despite inflation running high.

“The first half of the year had an 8 per cent value growth, which indicates an overall positive outlook for January-December 2022. The second half of the year will be driven by the festive season, and normal monsoon that will give the necessary push to consumption patterns for the sector,” said Rajesh S Shirali, data science market and client engagement lead, NielsenIQ India.

The FMCG sector grew at 10.9 per cent in the April-June quarter against 6 per cent in the preceding quarter. However, this growth was mainly price-led with 11.6 per cent coming from increase in prices and -0.7 per cent from volumes.

The volumes during the quarter, although negative, improved from –4.1 per cent in January-March quarter to –0.7 per cent in April-June, thus indicating consumption revival.

“This beats the last two quarters of consumption decline and highlights the onset of cautious optimism among consumers. Also, the consumption recovery and promising macro factors support NielsenIQ’s forecast of double-digit growth for 2022,” said Satish Pillai, managing director – India, NielsenIQ.

The overall consumption revival seen during the quarter is led by a jump in unit growth. While the average pack size has reduced, unit growth has bounced back to 8.9 per cent this quarter from 1.5 per cent in previous quarter, indicating that the consumers are buying smaller packs, but more units, Nielsen data said. 

The consumption revival is led by the foods category, which saw positive volume growth of 1.8 per cent in April-June with products such as chocolates, salty snacks growing by 15.1 per cent, Nielsen said.

Second, there has been a revival in non-essential category, with personal care products like perfumed deodorants & cologne, skin creams, coconut oil, hair dyes, talcum powder seeing growth. The overall non-foods category is still in negative, although there is a marginal uptick from -9.6 per cent in January-March to -6.4 per cent in April-June.

During April-June, urban markets revived with positive volume growth of 0.6%, compared to slower recovery in rural markets of -2.4% for the quarter.

The consumption revival has also brought small manufacturers back on track who saw positive volume growth of 1.8 per cent in Q2 2022, from –8.5 per cent in Q1 2022 on the back of unit growth, primarily in food.

“Small manufacturers suffered last year because of lockdown, consumption decline and it was accentuated by inflationary pressure as they were not able to pass on the rise in raw material to customers,” said Sonika Gupta, customer success lead (India), NielsenIQ.

FMCG Major ITC Exits Lifestyle Retail Business

Meanwhile, FMCG major ITC has announced it has exited its lifestyle retailing business.  The decision was made after a strategic review of its business portfolio, the company said in a regulatory filing. The company in its annual report released earlier said that following a strategic review of the business portfolio a few years ago, it has restructured the Lifestyle Retailing Business during the year.

“At the same time, the product portfolio has been strengthened in alignment with new opportunities and enterprise strengths with a sharper focus on fortifying the core, addressing adjacencies through world-class mother brands and building categories of the future to power growth,” ITC chairman Sanjiv Puri had said in the report.  ITC’s Lifestyle Retailing Business has a nationwide presence through its Wills Lifestyle chain of exclusive speciality stores.

Wills Lifestyle is available in 90 exclusive stores in 40 cities and across more than 500 ‘shop-in-shops’ in departmental stores and multi-brand outlets.  The diversified conglomerate has reported a 33.97 per cent year-on-year increase in consolidated net profit at INR 4,389.76 crores in the June quarter as compared to INR 3,276.48 crore net profit in the same quarter a year ago.