Rising prices force consumption slowdown in FMCG sector

New Delhi, June 2 (KNN) The consumption of fast moving consumer goods (FMCG) is witnessing a slowdown as companies hike prices across categories to adjust for high input costs.

Although the sector has registered a 6 per cent growth in the January-March quarter over last year due to increase in prices, sales volumes plunged by 4 per cent — the highest in the last three quarters, as per media reports.

The slowdown has also led to an increase in exit of small manufacturers in the quarter (5. 3 per cent) as they were finding it difficult to pass on the higher input costs to the consumers.

The overall FMCG volumes were pulled down largely by price-sensitive rural markets that bore the brunt of higher price increases (11. 9 per cent in rural versus 8. 8 per cent in urban)

“From labour shortage to skyrocketing fuel prices, input costs for manufacturers are at an all-time high. This has severely impacted margins,” said Radhey Shyam Dixit, CMD at Ananda Dairy.

According to the NielsenIQ report, the rural consumption dipped more than 5 per cent during the period as categories such as refined and non-refined edible oil, vanaspati, packaged Atta witnessed 15 per cent price increase.

“In continuation from last year, macro-economic indicators are still guiding consumption patterns for the Indian consumer, and they are feeling the impact of the price increase, especially in the food and essentials categories,” said Satish Pillai, MD, India, NielsenIQ.

The overall volume declined, however it is significantly higher in non-food categories (-9. 6% for non-food, -1. 8% for food). Within foods, impulse items beat the slowdown blues with volume growth of 1. 5%, as consumers have turned to smaller packs of salty snacks, chocolates and confectionery.

“Although global macro factors persist, the impetus by the government, if supported by the normal monsoon, would be encouraging. Within this environment, retail trade continues to be optimistic, and traditional trade shopkeepers have maintained stock levels, as well as assortment,” said Pillai.  (KNN Bureau)