FMCG growth seen slowest in 4 years

Nielsen estimates 5-6% full-year growth in CY20, down from 9-10 %

The country’s ~4.3-trillion fast-moving consumer goods (FMCG) market will see its slowest growth in four years due to the Covid-19 pandemic and lockdown that has disrupted supply chains and consumer behaviour.

A forecast by market research agency Nielsen on Thursday pegged FMCG growth for the 2020 calendar year in the range of 5-6 per cent, half of what was estimated by it in January. Back then, Nielsen had said that full-year growth for 2020 would be in the range of 9-10 per cent, in line with the 2019 growth rate of 9.2 per cent. FMCG growth rates in 2018 and 2017 stood at 13.5 per cent each.

The markdown by Nielsen comes as the lockdown drags on in India, with an exit likely in a phased manner. Containment zones are not likely to see easing of restrictions as Covid-19 cases continue to rise in the country.

“All this means that the April-june period will be the worst-hit in terms of FMCG consumption,” says Prasun Basu, president, South Asia, Nielsen. He estimates some recovery in the second half of the year, but says this may not be enough to push up the overall growth rate for 2020.

In the March quarter, FMCG growth, according to Nielsen, was 5.3 per cent excluding ecommerce. If e-commerce sales are added, the growth rate improves to 6.3 per cent for the quarter, in line with the estimate the market researcher had made last month.

However, as Nielsen as well as industry experts say, the full Covid impact does not show in the January-march period, since the lockdown began (partially) from mid-march onwards. While January and February saw FMCG growth at 6.4 per cent, the month of March saw growth fall to 3.3 per cent, Basu says.

Q2 of calendar year 2020 will show the full impact of the lockdown, a point articulated by global and local FMCG firms, including names such as Unilever, Procter & Gamble, Nestlé, Coca- Cola, Pepsico, Godrej Consumer (GCPL) and Marico.

Some CEOS have said a revival in the second half will depend on the extent to which the disease is contained. “This could be a story of two halves, depending on how long the crisis lasts,” says Vivek Gambhir, managing director and chief executive officer, GCPL.

“From a planning point of view, what we are assuming at GCPL is that the impact of the virus will be acutely felt in Q1 of FY21 (April-june) and there could be some impact in Q2 (July-september) as well. But, if the crisis subsides then you could see the second half (of FY21) being very different from the first,” he said.

Among categories that have taken the biggest hit in the March quarter are home and personal care, says Nielsen. Clubbed as non-foods, this segment, says Nielsen has fallen to 1.8 per cent in terms of growth rate (in January-march) versus 3.8 per cent in the December 2019 quarter.

In March, for instance, says Basu, non-foods saw negative growth (-0.8 per cent), pointing to the hit that discretionary spending has taken during the Covid crisis. Foods, on the other hand, saw growth of 6.2 per cent in March, while the quarter (January-march) saw growth of 7.8 per cent, marginally lower than the 8.3 per cent growth seen in the December quarter.