The fast-moving consumer goods sector is anticipated to experience sluggish growth until the September quarter of 2024, as per a report from Kantar, a data, insights, and consulting firm.
The uncertain outlook for the agricultural sector, coupled with the upcoming general elections, is expected to limit the consumption of FMCG products. Kantar Worldpanel’s FMCG pulse report suggests that although some relief may come from certain summer-related and laundry product categories, their growth is unlikely to significantly impact the overall FMCG industry.
However, the report remains optimistic, predicting a gradual improvement in growth post-September, particularly in the second half of the year, driven by favorable Rabi harvests.
“As a result, we do see FMCG growth to be subdued, at least until Q3 of 2024. Keeping in mind the stronger first half of 2023, we may even end up seeing some stagnation in the early part of the year, with things getting progressively better,” it said.
According to the research, the general election is scheduled for the June quarter of 2024, and there has been no increase in FMCG in previous elections.
“On the contrary with all the freebies announced there was only stagnation or shrinkage,” it said.
Consumption increased by 0.7 per cent in 2009, remained flat in 2014, and decreased in 2019.
“While the voter, and therefore the consumer has evolved from then to now, we really do not see FMCG at the national level being impacted significantly due to the general elections,” it said.
The analysis anticipated India’s agricultural growth to be 1.8 per cent in 2023-24, a seven-year low.
“As per the first estimates of Kharif crops released, almost all Kharif crops have seen lower yields due to uneven rainfall. This is likely to impact the first half of 2024,” said the report.
Despite mild disruptions in Rabi sowing, the overall situation appears promising with a notable increase in the wheat crop’s hectarage, indicating the potential for a favorable outcome, particularly in the second half of the year.
The report highlights that, following the pandemic, 2023 marks the second consecutive year where the average purchase quantity has failed to show growth. Among the 90 categories and subcategories tracked, half of them either experienced a decline in consumption or remained stagnant.
Cooking oils witnessed the most significant decline in average consumption, with 1.4 fewer liters purchased in 2023 compared to 2022. However, it is noteworthy that despite this decrease, the average spending on this category increased by Rs 95.
“In reality, if shoppers were purchasing the 2022 quantity with 2023 prices, they would have been spending Rs 286 extra, however, the drop in consumption of the category has reduced this extra spend to the aforementioned Rs 95,” it said.
Atta has continued to rise in double digits throughout 2023, and as a result, FMCG appears to have grown at a healthy 6.1 per cent in 2023, it stated.
“Removing Atta from the mix brought the growth down to 2.7 per cent. Incidentally, 2.7 per cent is also the population growth in the year, which meant that FMCG volumes have grown purely on the basis of household population growth,” the report said.
