Sales of soaps-to-staples increased sequentially in December but remained lower from a year earlier as consumers remained cautious in their spending, indicating how difficult the recovery from the inflation-led slowdown will be.
Value across commodities such as edible oil and packaged wheat flour, personal care, and confectionery rose just 1.4% month-on-month in December, according to data shared by retail intelligence platform Bizom, which tracks sales across 75 lakh outlets.
However, the number of active kirana, or fully operational outlets, fell 1.8% sequentially even as monthly stocking rose 3.3% in anticipation of higher demand before the wedding season, according to Biozom.
The December numbers follow a sharp 15.3% sales decline in November, when retailers had piled up unsold inventory from the festive season as demand tapered off. The December numbers follow a sharp 15.3% sales decline in November, when retailers had piled up unsold inventory from the festive season as demand tapered off. In fact, fast-moving consumer goods companies' sales either fell or remained flat for the majority of 2022, as price-conscious shoppers cut back on purchases amid rising prices.
Overall sales were still down 4.7% from the previous year, driven by weak rural demand. In December, the value growth of FMCG sold in rural India dipped by 12.5%, while they increased 12.4% in urban areas.
Sequentially, demand from rural areas fell 0.2%, but this was better than the sharp 17% drop seen in November, according to Bizom data.
FMCG companies also agreed that they witnessed some green shoots in rural demand in the last few days of December. Adani Wilmar, Patanjali Foods, and Parle Products are some that said that volumes are showing signs of improvement on the back of easing inflation, promotions, and price cuts. They expect the sales figures for the January-March quarter to reflect the same.
However, others, such as Tata Consumer Products Ltd. and Marico Ltd., are "cautiously optimistic" about India's rural recovery and expect overall consumption to improve "gradually" towards the second half of 2023.
Categories like beverages and packaged foods were down 26.3% and 12.9%, respectively, in December over the previous year. Personal care sales fell 12.5%, confectionery sales fell 25%, and home care sales dipped 14.4%.
These categories, according to Bizom, were also in the red when compared to November, with the exception of home care, which grew 10.9%.
Commodities was the sole category which grew 9.8% sequentially and 16.3% over the previous year in value terms on account of softening of prices, the Bizom data showed. This comes even as companies cut prices to pass on the benefits of lower input costs to consumers to spur demand.
“Consumption slowed post-festival season amid inflationary challenges,” Akshay D'Souza, chief insights and growth officer at Bizom, told BQ Prime. “Higher prices led consumers to focus less on discretionary products in November and December, dragging sales for the quarter.”
The value growth of FMCG products retailed in the October-December quarter fell 3.7%, according to Bizom. "As we look forward to 2023, we do see a lot more focus from companies on increasing consumption as price-led growth seems to have hit a wall towards the end of last year," said D'souza. "This will mean more value for consumers in the year ahead."
According to Abneesh Roy, executive director, Nuvama Institutional Equities, "the extent of the year-on-year slowdown is easing in Q3 due to a favourable base effect."
Calling it "early days" for sustainable recovery, he said that a key risk is weak sentiments in states like Uttar Pradesh, Bihar, West Bengal, and Jharkhand that are rooted in rainfall shortages this year, thereby denting incomes.
Grammage cuts, according to Roy, are reversing in soaps and biscuits among others as costs are easing off, which will aid volume growth in FY24.
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