The National Industry Quarterly report states 8.6% volume growth in the FMCG sector

08 Nov 2023

The National Industry Quarterly report states 8.6% volume growth in the FMCG sector

India's fast-moving consumer goods (FMCG) industry has experienced a significant uptick in growth during the July–September quarter of fiscal year 2024 (Q2 FY24). Data released by NIQ (formerly NielsenIQ) on Tuesday, November 7, 2023, revealed that this growth was primarily fueled by the resurgence of rural markets, coupled with the alleviation of inflationary pressures.

The FMCG sector in India achieved a remarkable year-on-year (Y-o-Y) growth rate of 9% in terms of value during Q2 FY24. Sales volumes, a key indicator of consumption, also exhibited a healthy rise of 8.6% during the same period, signifying positive consumption trends on a nationwide scale. Notably, sales volumes in rural markets surged by 6.4% year-over-year in the quarter, according to the research firm.

Within the broader FMCG industry, both food and non-food categories demonstrated a solid growth rate of 8.7% year-over-year in Q2 FY24. This data indicates that consumption patterns are on an upswing, with rural markets leading the charge in terms of recovery.

Satish Pillai, the Managing Director of NIQ India, remarked, "The FMCG industry has seen a notable decrease in price growth from the last quarter, providing a crucial boost to the consumer's spending power. This trend is clearly visible in rural markets, with increased consumption in various categories."

Pillai further stated that the overall cooling of inflation in the country, driven by base effects, as well as the recent decline in unemployment figures and LPG prices, among other factors, had contributed to the consumer's increased willingness to spend.

The boost in consumption can be attributed to an increase in the number of units sold across rural markets, traditional trade, and modern trade, showcasing a holistic trend across the FMCG landscape in India.

Roosevelt D'souza, the Lead for Customer Success at NIQ India, emphasized that unlike other APAC (Asia-Pacific) markets, where subdued growth is driven by price hikes, the India story revolves around higher consumption. He further noted that there was a continuation of the gradual trend observed in recent months, with rural consumption experiencing a positive trajectory.

Interestingly, consumer preferences in rural and urban markets differ, with consumers in rural areas gravitating towards smaller-sized FMCG packs, while urban markets still favor larger-sized packaging.

The modern trade segment observed robust double-digit growth, surging by 19.5% in the quarter, while traditional trade also displayed signs of resurgence, with consumption increasing to 7.5% during the period, up from 6.2% in the preceding quarter (April-June).

Another noteworthy aspect of this growth is the performance of smaller manufacturers, which are experiencing faster growth rates in non-food categories when compared to their larger counterparts. In the food category, larger players are growing faster in volume than their smaller counterparts.

Local brands have made substantial inroads into the FMCG market, capitalizing on lower raw material prices, which enables them to produce and sell products at more competitive prices. Notably, Hindustan Unilever and ITC, both prominent players in the FMCG industry, have acknowledged the increasing momentum of regional brands after announcing their results for the September quarter.

In conclusion, the Q2FY24 data for India's FMCG sector underscores the resilience of the industry, driven by the recovery of rural markets and the alleviation of inflationary pressures. As consumption patterns continue to evolve, FMCG companies in India are presented with opportunities and challenges, with both local and large players vying for a larger slice of the market share.

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