The Rs 5-trillion domestic fast-moving consumer goods (FMCG) market is encountering obstacles in its journey towards complete recovery from the existing slowdown, as per discussions with industry leaders and sector analysts. Despite a positive outlook presented by market research agency NielsenIQ for the March 2024 quarter, challenges persist.
Rural Market Performance
NielsenIQ reports a rural recovery between December 2023 and February 2024, with rural markets outperforming urban markets by 150-200 basis points in volume growth. However, March 2024 figures are pending release.
Factors Influencing Growth
- Low Base and Price Cuts: Growth is attributed to a low base and price reductions initiated by companies in the March quarter due to favorable commodity costs.
- Inflationary Commodity Costs: Recent inflationary trends in commodity costs may necessitate cautious management of the price-to-volume equation to protect margins while enhancing sales growth.
Company Perspectives
- Dabur India: Reports sluggish demand trends in the March quarter, with rural growth fueled by price rollbacks in staples. Expects improvement in consumer demand in forthcoming quarters.
- Godrej Consumer (GCPL): Expects subdued operating conditions within the Indian FMCG market in Q4, projecting mid-single-digit consolidated sales growth.
- Marico: Anticipates low single-digit consolidated revenue growth in the March quarter, with domestic revenue growth surpassing volume growth in subsequent quarters.
Analyst Projections
- Sachin Bobade (Dolat Capital): Suggests that rural volume growth is on a low base and will require time to stabilize.
- Kantar: Forecasts continued market subduedness until the September 2024 quarter due to global slowdown, minimal election impact on household consumption, and weather uncertainty affecting farm output and incomes.
- Bizom: Yet to disclose March quarter numbers and 2024 outlook. Reported sluggish 2% overall growth in FMCG sales in CY23, with urban sales slowing sharply at 0.4% compared to rural sales growth of 2.3%.
Multiple Choice Questions (MCQs) with Answers:
- What factor contributed to rural market outperformance in volume growth according to NielsenIQ?
- A) Urban migration
- B) Price reductions
- C) Global economic boom
- D) Increased competition
- Answer: B) Price reductions
- Which company expects mid-single-digit consolidated sales growth in Q4?
- A) Dabur India
- B) Godrej Consumer (GCPL)
- C) Marico
- D) NielsenIQ
- Answer: B) Godrej Consumer (GCPL)
- According to Kantar, what may contribute to the subdued FMCG market until the September 2024 quarter?
- A) Strong global economy
- B) High consumer spending
- C) Minimal impact of elections
- D) Weather uncertainty affecting farm output
- Answer: D) Weather uncertainty affecting farm output