FMCG Sales Rise As Shops Stock Up Ahead Of Festivals

India’s fast-moving consumer goods sector appears to be on a recovery path as retailers stocked up for Raksha Bandhan and the upcoming festive period, boosting sales of staples and chocolates to makeup and soaps.

FMCG sales grew 8.6% year-on-year in July, showed data shared by retail intelligence firm Bizom, which tracks kirana sales. This is an uptick from 4.6% growth in June and 7.3% in the April-June quarter, when shops stocked less due to weak consumer demand, especially in urban markets.

In July, urban sales remained stable with a 6% growth. Rural markets drove growth, expanding by 10.3% versus 3.6% in June, according to Bizom data.

"While July sales are showing promise after a subdued June impacted by unseasonal rains and sluggish demand, it's too early to declare a full-fledged recovery for the sector at this stage," Harshit Bora, head of analytics at Bizom told NDTV Profit. "However, if the trend sustains, then July-September is on track to be a better quarter for FMCG companies."

The higher sales also partly reflect the passthrough of recent price hikes taken by companies to offset inflationary pressure on margins, he added.

Category-wise, chocolates and confectionary and branded commodities drove the recovery in packaged goods sales registering sales value growth of 16.1% and 20%, respectively, in July. Sales of dairy products grew 11.5%.

Beverages, however, is still to rebound. Personal care, too, has seen slower growth as consumer spends on discretionary products remain tepid.

Sales of chocolates and confectionery rose as retailers beefed up their inventory levels to prepare for Raksha Bandhan, which fell on a Saturday, August 9, as well as the Independence Day weekend, said Bora.

Shoppers also flocked to quick commerce platforms like Swiggy Instamart, Flipkart Minutes and BigBasket for Raksha Bandhan essentials.

BigBasket saw 2.1 times jump in sales this Rakhi compared to last year. Gifting options like makeup, fragrances, chocolates and other general merchandise products saw "great traction", said Seshu Kumar Tirumala, chief buying and merchandising officer, BigBasket.

"Demand for gifting started showing up days before the festival this year, proving consumers aren't just turning to Instamart for their last-minute needs but also planning their festive purchases in advance," according to Manender Kaushik, AVP & category head – Instamart. Orders for chocolates surged 4 times compared to regular days, he added.

Flipkart Minutes, too, saw a spike in demand for gift hampers. It reported a 5 times uptick in chocolates orders and 3 times increase in dry fruits.

In recent earnings commentary, consumer goods companies including Dabur, Marico, Godrej Consumer Products Ltd. and Hindustan Unilever Ltd. have expressed optimism about a steady consumption recovery.

"Looking ahead, we are quite optimistic of a sequential recovery in demand on back of softening food inflation, favorable monsoon, sustained momentum in rural and some green shoots which are visible in the urban demand," Dabur MD and CEO Mohit Malhotra said.

HUL echoed similar sentiments. "We see urban growth coming back in the market, although it's still below rural," the management had said.

The company believes it will be a "volume-led with low pricing" growth, reflecting an improvement in the overall economy, driven by a stronger agri economy, low food inflation, favourable monsoon, and future prospects incentivised by positive fiscal and monetary impulses. "So given all of this, we expect this kind of growth to stick... there's no magic shift that's likely to take place, we expect a sustained and gradual recovery."

Britannia Industries MD & CEO Varun Berry, meanwhile, flagged uncertainty in urban demand with the overhang of tariff and technological disruption-led layoffs hurting sentiment among the salaried class, although he believes that government interventions could help soften the impact.

"It is difficult to gauge where sentiment is headed in the current market. These are turbulent times, but the policy interventions from the government and central bank could give a boost to consumption," he said.