Low rural offtake weighs as FMCG volumes shrink nearly 2% in Q3FY22

Fast-moving consumer goods or have seen demand, especially from rural areas, take a hit thereby pulling down their sales volumes. However, price hikes taken by the consumer firms to cushion the impact of rising costs have resulted in positive value growth for the industry.

Data by NielsenIQ sourced from the industry shows that volume growth in the October-December quarter (Q3FY22) contracted by 1.8 per cent for the sector while value growth stood at 9.9 per cent, compared to the year-ago period.

According to Bizom’s data, rural sales (in value terms) declined by 7 per cent in January on a month-on-month basis while urban sales of goods from shampoos to soaps bars declined 18.3 per cent which caused India’s overall sales to decline by 10 per cent. On a year-on-year basis, overall rose 9.5 per cent with rural growth being higher by 21 per cent compared to last year January. The overall growth is despite a decline in urban sales, which fell by 15.6 per cent year-on-year in January 2022.

“A key driver of growth year-on-year has been the significant jump in out-of-home consumption driven by high vaccination rates. Tier-2 urban cities (1-5 million population) have seen the biggest impact in sales during the 3rd wave in Jan-22 as stocking levels dropped significantly leading to the drop in sales,” Akshay D’Souza, chief growth and insights officer at Bizom told Business Standard.

In megacities, the decline was 13.3 per cent while in tier-2 cities, the decline in sales was the sharpest at 27.5 per cent. However, in tier-3 cities, sales of FMCG products rose by 7.7 per cent on a month-on-month basis in January 2022.

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Low rural offtake weighs as FMCG volumes shrink nearly 2% in Q3FY22

also called out the slowed down in volume growth in rural areas in their commentary post announcing their October-December results.

“Given the relative susceptibility inflation the rural has seen a visibly higher slowdown than urban,” Saugata Gupta, MD & CEO of Marico told investors post its earnings. He also said that the slowdown was seen in rural and especially in general trade.

Sanjiv Mehta, CMD at HUL also told investors, “We’ve cautioned about rural growth in our September quarter earnings call and we do see the deceleration taking hold with very high levels of inflation that consumers are witnessing. Volumes and market have declined and this decline is more accentuated in the rural markets, and in those categories, which have been impacted more by the inflation.”

Mehta also said, “One aspect we should not forget that in rural while the volume growth are negative, the value growth are still positive.”

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