The FMCG sector in India will face a slowdown in 2019 with a growth rate of around 9-10% impacted by a dip in demand, particularly the rural, according to a report.
The FMCG growth rate for the first half of 2019 is around 12%, which is lower than the previous forecast of 13-14%, the report by data analytics firm Nielsen said.
“Based on an analysis of key factors, a revised forecast for the year-end of 2019 puts all India FMCG growth to be in the 9-10% range,” the report ‘India FMCG Growth Snapshot’ added.
In 2018, FMCG sector had a growth rate of 14%, The sector is estimated to have around Rs 4.2 lakh crore sales.
According to the report, the demand is impacted by rural sales, which contribute around 36-37% of the total FMCG sales.
In rural sales, 60% spend on FMCG is on food items which include salty snacks and biscuits, said Sunil Khiani, Nielsen India Executive Director Client Solutions. “Sales in urban areas are also impacted but the decline is almost twice in rural areas,” he said.
Earlier, growth rate of rural sales was faster than urban markets led by factors such as increasing affordability, availability, and demand.
“However, rural growth is slowing down double the rate of urban in recent quarters.This has brought rural growth closer to urban growth in second quarter of 2019,” it added.
Nielsen expects food categories to grow at a higher rate in the coming quarters at 10-11% and personal care and home care category at 7-8%. “The outlook for next quarter stands at 7-8% and H2 2019 in the range of 8%,” the report said.
According to the report, in April-June 2019, FMCG value growth has dropped to 10% “inching towards a slowdown”.
“The FMCG growth trend is majorly dampened by volume led growth which has also moved 3.7 percentage points down from 9.9% in Q1 (January-March) to 6.2% in Q2 of 2019,” it added.
According to Khiani, April-June 2016 had the slowest growth rate of 2.4%. “This is the third consecutive slowdown in the sector after Q3 of 2018 which has 16.2% growth,” he added.
FMCG growth trends continue to see a consistently high price-led growth of 3.8% for the first two quarters of 2019.