FMCG market defies note ban blues in Q4

Sector grows two percentage points faster than the same quarter last year: Kantar Worldpanel

The FMCG market shrugged off the after-effects of demonetisation and posted six per cent year-on-year volume growth during the March 2017 quarter. The ~3.2 lakh crore domestic sector, the fourth-largest in the world, grew two percentage points faster than the corresponding quarter of the previous year, the data from Kantar Worldpanel show.

Fast-moving consumer goods (FMCGs) shrugged off note ban, posting a six per cent yearon-year (y-o-y) sales volume growth during the March quarter. The ~3,20,000-crore domestic sector, which is the fourth-largest in the world, grew two percentage points faster than the same quarter last year, data from Kantar Worldpanel show.

Growth in the sector was led by food and beverages (F&B), which grew six per cent y-o-y during the quarter, followed by household care, which grew five per cent in sales volume. Growth in personal care, which includes dispensable items like deodorants, face wash, and fairness creams, remained lower at four per cent y-o-y. Growth in personal and household care was the same as that recorded a year ago. F&B grew six per cent y-o-y this quarter and four per cent y-o-y during the same quarter last year.

The government had declared old ~500 and ~1,000 notes illegal on November 8, 2016, resulting in a cash shortage that lasted up to the early part of the March quarter. But, FMCG sector looks unaffected, data from Kantar suggest.

After growing five per cent y-o-y during the December 2016 quarter, the FMCG market started the year on a positive note, with seven per cent growth rate during January, again led by F&B. In February, however, household care items outpaced other categories with five per cent sales volume growth. Personal care segment, which faced severe headwinds during the December 2016 quarter with growth dipping to two per cent, revived in March 2017 quarter.

FMCG players ITC, Hindustan Unilever Limited (HUL), and Nestlé posted healthy growth during the quarter, which helped the market expand its size. HUL's (largest noncigarettes FMCG player) revenue grew 6.4 per cent and ITC's non-cigarettes FMCG business posted 6.5 per cent growth in revenue. F&B player Nestlé's domestic sales went up 9.7 per cent backed by strong sales volume growth in the March quarter. Britannia's net sales surged over six per cent y-o-y in the March quarter.

However, performances of some other key players were not as impressive as those with a wider portfolio. Coca-Cola's (the country's largest carbonated drinks maker) volume sales shrunk by low single digit and PepsiCo felt the note ban, too. Even diversified FMCG firm Dabur India's net sales suffered a 4.8 per cent dip, although sales volume grew 2.4 per cent. Emami's net sales declined marginally by 2.1 per cent in March quarter.

Most firms faced challenges during the first three months of the year, which resulted in no price hikes for most products. However, increased input costs after the rollout of goods and services tax (GST) may again lead to disruption in the sector, executives from many FMCG companies said.

According to them, repeated macroeconomic shocks have impacted the market dynamics, and the onset of GST, which is expected to fuel inflation, could keep growth rates in check during the rest of the year. While the FMCG sector managed to grow over five per cent despite severe cash crunch during end-2016, its growth still remains much lower than that seen in the early years of the current decade, when categories enjoyed double-digit expansion.