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FMCG sales decline in rural markets in Q2 FY23: Study

The impact of high inflation on rural households' spending on necessities like packaged food and soaps, indicates that due to rising prices in response to inflationary pressures, customers continued to prefer purchasing smaller packets
FMCG sales decline in rural markets in Q2 FY23: Study
FMCG sales decline in rural markets in Q2 FY23

The fast-moving consumer goods (FMCG) sales in India is forecast to keep slowing down in the September quarter of FY23, with rural volumes falling from the previous quarter, a recent study from ratings agency NielsenIQ has revealed.

The study, which examines the impact of high inflation on rural households’ spending on necessities like packaged food and soaps, indicates that due to rising prices in response to inflationary pressures, customers continued to prefer purchasing smaller packets.

In terms of overall volume, the domestic consumer packaged goods sector decreased by 0.9 per cent in the Q2 FY23 compared to the preceding quarter. It should be mentioned that the industry saw negative volume growth for the fourth consecutive quarter. This is “attributed to the double-digit price growth for the past six straight quarters,” according to the research.

While the pressure on inflation is still present, Satish Pillai, the managing director of NielsenIQ India, noted that fluctuations in rainfall throughout rural India have caused a softening of indicators for rural markets. This feeling can also be seen in the cautious actions of the retail industry.

In its study, NielsenIQ also noted that volume declines in rural markets were 3.6 per cent in the September quarter compared to a 2.4 per cent reduction in the June quarter. For the fifth consecutive quarter, rural volumes have been negative, the stdy said.

Double-digit price hikes and slower unit growth both contributed to the consumption reduction in rural areas. According to NielsenIQ’s FMCG Snapshot for the September quarter, rural consumers remained more skeptical than urban customers due to ongoing price rises.

According to the survey, double-digit price increases and slower unit growth are both driving the consumption fall in rural markets.

However, sales volumes in the urban markets increased by 1.2 per cent over the same time period. The food industry, which saw a volume gain of 3.2 per cent, drove this growth. The non-food FMCG segment, on the other hand, saw a decline of 3.6 per cent in Q2 FY23.

The research also noted that topline growth in India’s FMCG sector was still being driven by prices. In comparison to the preceding quarter, it reported an 8.9 per cent gain in the period from July to September.

In the March quarter of 2020, “FMCG volume and value sales are above pre-Covid levels” because “markets have totally opened up post-pandemic,” according to the research. “Average pack size growth is negative in July–September 2022, as customers continue to buy smaller packs.”

The majority of the new product offerings include modifications to pack sizes. As raw material costs are still high, this may be the result of producers using lesser grammages, the study said.

In comparison to the quarter before, the volume of traditional trade channels like Kirana and local stores decreased by 2 per cent in the second quarter of 2022-23. Additionally, the survey noted that modern trade channels including malls, supermarkets, and hypermarkets “remain resilient with double-digit value (22.2 per cent) as well as volume (11 per cent) growth.”

Read more: Vodafone Idea ramps up retail network in rural markets

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