Indicating signs of revival in consumer demand, India’s FMCG industry has registered a value growth of 10.2 percent in the January-March quarter of 2023, according to NielsenIQ’s latest FMCG quarterly snapshot.

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NIQ has said that in line with stabilisation in retail inflation, price growth further dropped in Q1 (calendar year 2023) to 6.9 percent compared to 7.9 percent in the previous quarter, aiding the revival in consumption growth.

Volumes also turned positive this quarter. The industry has seen a volume growth of 3.1 percent in Q1 2023, as against a decline of 0.3 percent in Q4 2023 (October to December quarter). In the same quarter last year (Q12022), volumes had declined by 4.1 percent.

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Volume growth in rural too, has turned positive after a decline for 6 consecutive quarters registering a growth of 0.3 percent, while Urban continued growth trajectory (5.3 percent).

Despite global uncertainties, NIQ has forecasted the FMCG industry to grow 7-9 percent for the full year 2023. However, it has said that pressure on consumers and low confidence levels and high unemployment rate may act as headwinds.

For FY23, the FMCG industry saw a value growth of 9.4 percent, with a volume growth of 0.4 percent and price growth of 9.1 percent.

“On the other hand, announcements made in the Union Budget 2023 on agriculture and capex investments, along with revisions in tax regime, 6.4 percent GDP growth forecast by RBI for next financial year and forecast of normal rainfall (adequate & timely monsoon) act as tailwinds,” NIQ added.

At an all India level, food categories saw higher consumption growth of up to 4.3 percent in the quarter as against a growth of 1.6 percent in the previous quarter with Staples driving this uptick.

According to the data, consumption or volume growth for Non-Foods too has turned positive this quarter -- after decline for 6 consecutive quarters -- led by Home Care categories, while Personal Care continues to decline. Rural revival is led by South (2.8 percent) and East (3.0 percent) zones.

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Traditional Trade, which includes kirana and neighbourhood stores too have witnessed a consumption growth revival (1.9 percent), while modern trade has retained a double-digit growth of 14.6 percent for the quarter.

“The positive consumption growth in the hinterland seen in the quarter is heartening, as more than 2/3rd of India’s population resides in rural areas of the country. Urban India continues to be the growth engine in terms of value growth, with organized retail seeing high double-digit growth in Modern Trade. For the first time in last year, we also see a turnaround in traditional trade - primarily driven by grocers,” Roosevelt D’Souza, India Customer Success Leader, NIQ said in a statement.

He added that Grammage reduction and shift towards smaller packs has continued. As per the data, improvement in consumption growth is led by more number of units being consumed, however shifts towards larger packs is awaited. Urban, Rural & traditional trade see an upward movement in terms of average pack size growth but remain negative, while modern trade continues showing further decline in average pack size growth, as per NIQ.

“The drop in the rate of inflation overall in the economy has also led to a decline in inflation for food categories and given an opportunity to consumers to be cautiously optimistic. This can be seen in the shifts in consumption patterns in the quarter gone by, and by consumers that are now willing to buy more. The upward trends seen in Rural markets is particularly encouraging, and may be the turning point for the industry”, Satish Pillai, Managing Director – India, NIQ added.

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First Published:May 10, 2023 6:05 PM IST