FMCG sector upbeat on Q2 results amid demand revival

Industry says consumers adjusting to new normal a major factor

The fast-moving consumer goods (FMCG) sector is upbeat on second quarter numbers, pointing towards the demand revival driven by the relaxation in restrictions as well as consumers adjusting to the new normal.

Godrej Consumer Products (GCPL) on Tuesday said it was likely to deliver double-digit sales growth in the second quarter, led by an uptick in categories such as hygiene and household insecticides.

It joins Marico, which had said on Monday that there were signs of revival in consumer demand, with core categories registering robust volume growth during the quarter. “Rural continued to outperform urban, aided by government-focused relief packages, the relatively lower impact of the pandemic, and resilience of the agricultural sector in a declining GDP context. The consumption shift due to reverse migration of labour also contributed to growth,” said Marico in its latest quarterly update.

Nielsen had last week said that the revival witnessed in the FMCG segment was driven by consumers in semi-urban and rural areas in the June-july-august period, thanks to a normal monsoon and rural welfare schemes intended to alleviate distress.

A survey of top FMCG executives by Nielsen in September showed 57 per cent of them intending to focus on central India or semi-urban areas, and 50 per cent striving to look at rural areas closely in a strategic shift, with the objective of taking advantage of rising demand from these regions.

Big FMCG brands have already begun closing the gap with smaller players, with the larger entities tiding over supplychain issues, distribution challenges, and retailer woes during the Unlock phase.

Nielsen says national and regional brands have been fighting to make their presence felt over the last few months, with the gap at around 11 points in MarchApril, when the bigger players had to temporarily suspend operations.

This gap narrowed to 8 points in May, as national brands fought back to revive operations, increasing again to 11 points in July when vertical lockdowns were introduced in various pockets of the country, before reducing to 9 points in August.

“Despite the tug-of-war, the trend is that the bigger players are closing the gap with smaller brands. This comes as operations get back to normal after disruptions witnessed earlier. National brands have also increased distribution and visibility. Many are pushing their presence aggressively into rural areas to tap growth there,” said Sameer Shukla, executive director (retail intelligence) of South Asia, Nielsen Global Connect.

GCPL said demand trends were stable and it was seeing sequential recovery in categories such as hair colour and air fresheners. Sector experts expect these trends to get stronger over the next few months, as economic uncertainty eases.

Marico, on the other hand, said that its flagship brands Parachute and Saffola had delivered strong growth in the second quarter, and that new launches were on strong footing.

“As lockdown restrictions ease, we maintain a positive outlook for the rest of the financial year, provided the ongoing health crisis does not escalate and economic activity revives steadily,” said Marico.