India FMCG grew 7.3% across general trade, modern trade & eCommerce for Q4 2019: Nielsen

According to Nielsen's Quarterly FMCG Snapshot report, last quarter of 2019 saw the FMCG industry grow at 6.6% indicating an arrest as against the sharp slowdown witnessed in the previous quarters

e4m by exchange4media Staff
Updated: Jan 21, 2020 3:39 PM

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Nielsen FMCG Report

FMCG for all India grew at 7.3% across general trade, modern trade and E-Commerce for Q4 2019 - marginally lower than growth in the last quarter (7.9% in Q3 2019). Nielsen’s eighth edition of the Quarterly FMCG Snapshot, released for Q4 2019 (months of October, November and December) also indicates that the slowdown is showing signs of steadying from a quarter on quarter view. For the full year, 2019 - value growth was at 9.2% (9.7% with E-Commerce) as against 13.5% in 2018.

Commenting on the development, Prasun Basu, South Asia Zone President, Nielsen Global Connect said, “2019 has been a tough year for the FMCG industry with over four-point decline, but we do see it stabilising in the last quarter of the year. A mix of macroeconomic factors, and channel and zone factors are driven by manufacturers, coupled with the consolidation of smaller players have been instrumental in the slowdown. A lower pace of innovation has further limited consumer demand pick up. However, 2020 offers a stable outlook for the industry arresting the 2019 decline."

Speaking on the report, Sharang Pant, Lead, RMS and Retail Vertical, Nielsen South Asia said, “While macro factors are still not conducive, FMCG growth in the last quarter of 2019 seems to be stabilizing. This comes from the festive uptick in MT and E-commerce channels. Excessive and untimely rains have impacted growth in the West Zone.”

Nitya Bhalla, Lead, Data Science, Nielsen South Asia said, “As we had anticipated, we are starting to see early signs of stability with the slowdown being arrested. The macroeconomic policies coupled with inflation/GDP trajectory, manufacturer actions and consumer sentiment is expected to lead to money in the hands of consumers, thereby fueling consumption. Our forecasts for Q1'20 is 8-9% and for the full year 2020 is 9-10%, similar to the year gone by.” 

The last quarter of 2019 saw the FMCG industry grow at 6.6% (7.3% with eCommerce), indicating an arrest as against the sharp slowdown witnessed in the previous quarters. The same period year ago was a high double-digit (15.7% in Q4 2018).

This stress in industry growth is also witnessed in the Macro-Economics environment with:

  • GDP growth slipping further to 4.5% in Q3’19 from 5% in Q2’19
  • Consumer Price Inflation jumping to 5.8% in Q4’19 from 3.5% in Q3’19 (Reaching a high of 7.3% in Dec’19)
  • Spurt in job losses/rising unemployment leading to the general acceptance of the downturn.
  • Untimely and excess rainfall impacting farm produce adversely in some states

Modern Trade and eCommerce help sustain overall growth

This quarter organised retail continued its rise with both Modern Trade (15% growth in Q4 2019) and E-Commerce channels (53% in Q4 2019) inching up on account of affordable pricing and festive pickup.

Growth witnessed in Modern Trade is based on both distribution expansion as well as same store throughput growth; while E-Commerce is an emerging channel and witnessing high growth through increase in adoption by consumers as well as Manufacturers Traditional Trade, the highest contributing channel to FMCG with 90% contribution witnessed significantly slower growth Q4’19 (5.7% vs 16% in Q4’18). This drop is led by shrinkage of consumption indicated by a 10 percentage points drop in volume growth (from 12% in Q4’18 to 2.6% in Q4’19).

Rural is stable at low growth levels while urban continues to decelerate

Traditionally, Rural India nearly three-fourths of India’s population and contributes to 36% to overall FMCG spends, historically grown around 3-5% points faster vs. urban. However, in the last quarter Rural growth dropped below Urban for the first time in 7 years.

In Q4’19. Rural remains stable at low growth levels (5.2%) as against the previous quarter (5.3% in Q32019). Urban, however, continues to decelerate further - from 8.4% in Q3 2019 to 7.4% in Q4 2019. The downward trajectory in Rural and Urban markets can be attributed to shrinkage in consumption by the consumer today.\

West zone continues to dip while other zones stabilise

In the last quarter of 2019, the North, East and South maintain stable growth against the previous period. However - the West Zone showed a decline. The West zone had a 4.6% value growth (down from 15% in Q4’18 and 6.3% in Q3’19). The slowdown in the zone was led by shrinkage in volume growth which has become almost flat at 1.1% in Q4’19 (11% in Q4’18). The Urban market and General Trade are the key drivers of the slowdown in the West, while Modern Trade continues to grow.

Outlook for 2020

FMCG growth for Q4 2019 stands at 7.4% against a prediction of 6.5 – 7.5% (including E-Commerce). All India FMCG full-year growth for 2019 is at 9.7%, which is in line with the prediction of 9% - 10%. In 2020, expect Q1 (Jan-Mar 2020) FMCG growth to be in the range of 8% - 9%. Q1 2020 is expected to be marginally higher than Q4 2019. Q1 2020 would be the lowest Q1 quarter in the past 3 years. The full-year 2020 forecast is stable at 9%-10%.

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