Inflation drags down rural FMCG sales
NEW DELHI: Fast-moving consumer goods (FMCG) makers continued to report a decline in rural sales, as those less welloff, mostly living in villages, felt inflation pinch them acutely.
Sales in rural markets declined for the fifth straight quarter in the three months ended September 30, market researcher Nielseniq said on Thursday. Sales volume declined at a faster 3.6% rate in the September quarter than the 2.4% decline in the preceding three months.
Rural households are more vulnerable to inflation as they spend a more significant portion of their income to fulfil the basic needs of food, shelter and clothing. With little left after spending on food and shelter and rising prices of packaged goods, the poor have cut down on expenditures for even basic items such as soaps and detergents. The poverty ratio is estimated to be as high as 32.75% in India’s rural areas against 8.81% in urban areas, according to NITI Aayog’s estimate.
With continued price increases, rural consumers remain more cautious than urban, according to Nielseniq’s FMCG Snapshot for the September quarter.
On the other hand, demand in urban markets continued to report a positive trend, growing both year-on-year and sequentially. In the September quarter, urban sales volume rose by 1.2%, led by an uptick in demand for foods. The FMCG industry grew 8.9% from a year ago in value terms in the three months to September. However, value growth declined sequentially. However, FMCG sales volume declined by 0.9% in the September quarter, capping the fourth quarter of volume declines. The slowdown in volumes can be attributed to double-digit price growth for the past six consecutive quarters.
Nielseniq’s numbers point to weak consumer demand and the impact inflation has on household consumption. Manufacturers have been compelled to pass on price hikes to consumers and make grammage cuts to safeguard margins.