FMCG sector faced consumption slowdown in Indian urban markets in 2021: Report

NEW DELHI: Nielsen, a Data analytics firm, said that the Indian FMCG (Fast-Moving Consumer Goods) industry witnessed a consumption slowdown in urban markets and de-growth in rural areas on India in 2021. It cited the sector being hit hard by higher inflation levels forcing companies to go for successive price increases as the reason.

In 2021, the FMCG industry went for double-digit price growth in three consecutive quarters to protect its margins, which converted into a price-driven growth of 17.5 per cent in comparison to 2020, the report said. According to the FMCG Snapshot released by Nielsen IQ’s Retail Intelligence team, the FMCG industry witnessed a consumption de-growth of 2.6 per cent in October-December quarter due to inflationary pressure and other macroeconomic factors.

The Nielson report added that price rise continues to impact small manufacturers, where the number of small manufacturers, having a turnover below Rs 100 crore dropped by 13 per cent due to the difficulty of continuing operations with higher costs. However, large and medium manufacturers stayed stable through the year. The report added that the pace of opening new FMCG stores was double in the last two years in comparison to the pre-COVID years.

Rural markets in India continued to bear the brunt of price increases during October – December quarter. The resulting consumption slowdown continues to be more prominent in rural market with consumption degrowth at 4.8 per cent. Meanwhile, urban markets are comparatively better with consumption degrowth at 0.8 per cent. According to the report, the overall slowdown is caused by 4.8 per cent volume degrowth in traditional trade in both urban and rural markets. Diptanshu Ray, NielsenIQ South Asia Cluster Lead, commented that India’s macroeconomic factors continued to witness softness during the fourth quarter, and global inflationary pressure is creating a long term impact.