- FMCG volume growth expected to slow to 4% by year-end due to multiple pressures
- Recent FMCG growth steady at 4.5-5% but lacks broad-based urban consumption revival
- FMCG value growth forecasted around 10%, supported by price hikes and shrinkflation
The fast-moving consumer goods (FMCG) sector is showing little sign of a broad-based recovery, with the volume growth likely to slow to 4% by the end of the year as geopolitical tensions, inflationary pressures and an uneven monsoon cloud the consumption outlook, according to K Ramakrishnan, Managing Director - South Asia at Kantar's Worldpanel division.
"It (FMCG growth) has remained 4.5-5% in recent quarters, even as some listed companies reported stronger-than-expected results for the June quarter," he told NDTV Profit. However, the improvement has yet to translate into a broad-based revival in consumption, particularly in urban markets. "If the war deepens and the prediction of a weak monsoon holds true, we expect growth to taper further to 4%," Ramakrishnan said.
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Worldpanel expects FMCG value growth to remain stronger at around 10%, aided in part by price increases. Companies like Colgate, Hindustan Unilever, Dabur, Britannia Industries, Godrej Consumer Products are planning more price hikes as higher commodity prices put pressure on margins, even as they remain optimistic about demand.
The sector, which raised prices by about 2-5% in the June quarter, is turning to a mix of selective price increases and shrinkflation - reducing the quantity in packs without proportionately lowering the price - to offset higher input costs.
Ramakrishnan also pointed out that the urban slowdown has become more visible among listed FMCG companies. "Broader urban consumption shows less tightness," he said, pointing to signs that urban demand is not uniformly weak. However, he warned, fresh macroeconomic risks could limit the pace of recovery in the coming quarters.
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War-related inflation is expected to weigh more heavily on urban demand, where consumption has been relatively subdued. A prolonged conflict could further weaken discretionary spending and make consumers more cautious. A weaker-than-expected monsoon, on the other hand, could put pressure on rural incomes and consequently affect demand for packaged goods.
A weaker monsoon, coupled with elevated inflation, could delay a fuller rural recovery.
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