Rural markets drive FMCG growth in Q2 FY21, reports Nielsen

Rural markets have bounced back handsomely on the back of support provided by the government as well as good agriculture, reverse migration and a lower unemployment rate, Nielsen audit data has noted
Rural markets drive FMCG growth in Q2 FY21, reports Nielsen
Rural markets drive FMCG growth in Q2 FY21, says Nielsen study (Representative photo from Shutterstock)

With easing of COVID-19 pandemic and markets unlocking in various phases in the second quarter of FY 2020-21, the sales of fast moving consumer goods (FMCG) has seen a recovery across town classes with the rural and Rest of Urban (ROU) regions continuing to lead growth. FMCG sector witnessed a double digit growth of 10.6 percent in July to September quarter in the financial year in rural India, while the bigger cities with higher than 1 lakh population including metros and town class 1, played catch-up, Nielsen’s India FMCG Growth Snapshot has said.

The rural markets have bounced back handsomely on the back of support provided by the government as well as good agriculture, reverse migration and a lower unemployment rate, the report has noted.

Various favourable macro-environment factors have helped drive rural revival in Q2 of 2021

Government dialing up on rural stimulus in the form of increased allocation under Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) which saw 11 percent increase in average wages at an All India level (Sep vs Mar’20). Further, as a result of reverse migration into the rural areas, 83 lakh new households joined MGNREGA labour force. Notably, the Government of India had allocated Rs 40,000 crore to MGNREGA under special COVID-19 package besides Rs 61,500 crore annual budgetary allocation to the flagship rural employment scheme.

Garib Kalyan Rojgar Abhiyan support to agriculture and upskilling programmes for migrant workers that returned to their villages supported the growth of FMCG sales in rural India.

Also , a bountiful monsoon brought cheer to farmers with a record output in the Kharif crop season played significant role in FMCG sales.

The FMCG slowdown in April-June quarter 2020 saw a value decline of 19 percent as compared to the same period of 2019. This was fuelled by massive disruptions in the production and supply chain, and low consumer confidence, the study noted.

The unlock from Q2 of FY21, saw a revival in the industry with a growth of 1.6 percent versus a year ago. The revival was aided by businesses opening up with the pandemic reaching stable levels. Markets started opening up in a phase-wise manner and store closures came down to an average of 3 days a month in Q2 from an average of 9 days a month in Q1 of the financial year. After being cooped at home for a long time, consumers also started looking at resuming normal consumption levels.

Macro economic environment

With the pandemic achieving stability and markets and economy opening up, green-shoots were visible in the July-August-September quarter for the year. There was an appreciable improvement in the performance of manufacturing, witnessed with an arrest of the declining Index of Industrial Production (IIP) from -57.3 percent in April 2020 to +0.2 percent in September 2020. Drop in unemployment rate from 23.7 percent at its peak in April 2020 to 6.7 percent in September, the Nielsen audit data revealed.

Staples continues to drive growth

According to the Nielsen audit data, with the opening of the economy all baskets showed signs of recovery, albeit with some clear changes reflecting consumers’ product preferences. Consumers prioritised spending on essential foods during the lockdown quarter and with the unlock quarter this accelerated to double digit growth.

Personal care & Home care move towards revival

“We saw an interesting trend in the non-food (Home care and Personal care) categories too. The segment registered a movement towards revival with Unlock in Q2 FY2021, indicating a need to move towards normalcy. With heightened consciousness around health and wellness, the ‘health and hygiene’ categories have become an integral part of the new normal of the consumers and continued to boom in Q3’20 as well,” the study said.

Traditional trade & e-commerce gain

Traditional trade and e-commerce channels increased in salience in the Q2 of FY2021 against the pre-COVID period.

Traditional trade that was impacted by store closures during locked down bounced back with unlock aided by consumers preferring to shop closer home. E-commerce continued on its growth momentum, especially in the metros, where its salience increased by 2 percentage points (a 34 percent increase in contribution) in Q2 of FY2021 against Q4 of FY2019-20, the Nielsen study said.

Health & hygiene dominates new launches

According to the report, Ttere have been a higher number of new launches per se during the COVID-19 period and a higher number in the non-foods space. As COVID-19 has prompted consumers to re-frame their habits into health and hygiene, more new launches have been made in the health & hygiene basket including categories like hand sanitisers, floor cleaners, toilet cleaners, antiseptic liquids. New launches in the health & hygiene space contributed to 37 percent (in value) of all new launches in the COVID-19 period. The value contribution of new launches in the health & hygiene category was higher during COVID period at 2.9 percent.

The Changing Face of Rural India