Nielsen lowers growth outlook for Indian FMCG

Rural demand sees spike in June

Nielsen lowers growth outlook for Indian FMCG
FMCG consumption slowed down in March April, especially in organised or modern retail in India. Photo CC Wikipedia

Marketing research firm Nielsen has slashed the growth outlook for the Indian FMCG industry this year, given the disruptions caused by the lockdown to stop the spread of the Covid-19 pandemic. It expects a flat growth ranging from -1% to 1% for the branded FMCG industry in India, as against the 5 to 6% growth it projected earlier this year.

“Severe and extended lockdowns, restrictions on manufacturing units and movement of people and goods, social distancing norms, and store closures, etc., have had a significant impact on the Indian FMCG industry. So much so that the industry growth went to a negative zone in the first half of 2020 (6% decline in the January to June period),” Nielsen said.

Lockdown hits hard 

The FMCG slowdown, which started in March, was amplified in April-May when the industry declined by 28% compared to the same period of 2019. Nielsen said this was due to massive disruptions in production and the supply chain and low consumer confidence.

Unlock 1.0 in June, did see a revival with the industry clocking 4.5% growth versus the previous year. The recovery was aided by opening up retail stores and consumers looking at resuming normal consumption levels across categories. The opening up of retail stores is evident from the fact that the average number of days of store closure dropped from 11-12 days in April-May to five days in June. However, the smaller towns and rural markets had a stronger bounce back in June after two months of negative growth during the lockdown.

Traditional trade and eCommerce bounce back

All three channels — traditional trade, modern trade, and eCommerce were impacted in the quarter, on account of store closures, supply chain issues, and disruptions in last-mile delivery. The situation improved in June when traditional trade and eCommerce channels bounced back strongly, Nielsen said.

The traditional trade channels felt the highest impact in the quarter because of store closures during the lockdown. On the other hand, modern trade had a spike in sales towards the latter part of March and early April, when consumers used this channel for upstocking. However, subsequently, there were issues on account of lower footfalls that impacted channel sales. 

The third channel, eCommerce that has been witnessing the fastest growth on a small base, faced challenges of supply chain and last-mile delivery—government regulations and movement restrictions in April severely affected last-mile deliveries.

Among product categories, while all baskets saw a revival in June across the retail channels, a steep improvement was witnessed in personal care categories and staple foods in the traditional trade and eCommerce channels in June.

Rural demand sees spike in June 

Agricultural markets led the industry revival in June with a double-digit (12%) growth versus June of 2019. At an overall quarter level, rural markets were less impacted than their urban counterparts (11% decline for rural vs. 20% for urban areas).

Factors such as lower Covid-19 incidence, rural stimulus in the form of increased MNREGA allocation, and support to agriculture and upskilling programs for migrant workers who returned to their villages helped in the rural areas. An overall normal and timely rainfall, high net sown acreage for kharif crops, and reverse migration have added to the agricultural labor and consumer base.


2023 promises an interesting ride for print in India

Indian Printer and Publisher founded in 1979 is the oldest B2B trade publication in the multi-platform and multi-channel IPPGroup. While the print and packaging industries have been resilient in the past 33 months since the pandemic lockdown of 25 March 2020, the commercial printing and newspaper industries have yet to recover their pre-Covid trajectory.

The fragmented commercial printing industry faces substantial challenges as does the newspaper industry. While digital short-run printing and the signage industry seem to be recovering a bit faster, ultimately their growth will also be moderated by the progress of the overall economy. On the other hand book printing exports are doing well but they too face several supply-chain and logistics challenges.

The price of publication papers including newsprint has been high in the past year while availability is diminished by several mills shutting down their publication paper and newsprint machines in the past four years. Indian paper mills are also exporting many types of paper and have raised prices for Indian printers. To some extent, this has helped in the recovery of the digital printing industry with its on-demand short-run and low-wastage paradigm.

Ultimately digital print and other digital channels will help print grow in a country where we are still far behind in our paper and print consumption and where digital is a leapfrog technology that will only increase the demand for print in the foreseeable future. For instance, there is no alternative to a rise in textbook consumption but this segment will only reach normality in the next financial year beginning on 1 April 2023.

Thus while the new normal is a moving target and many commercial printers look to diversification, we believe that our target audiences may shift and change. Like them, we will also have to adapt with agility to keep up with their business and technical information needs.

Our 2023 media kit is ready, and it is the right time to take stock and reconnect with your potential markets and customers. Print is the glue for the growth of liberal education, new industry, and an emerging economy. We seek your participation in what promises to be an interesting ride.

– Naresh Khanna

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