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Decline in rural sales hits FMCG in 2019
In the last two quarters, rural sales were half of the urban sales growth due to liquidity crunch, and drop in GDP
New Delhi: With most of 2019 spent in battling for growth, the FMCG industry expects a revival in consumer demand and household purchase by the second half of 2020, particularly from the rural sales that have been severely impacted in the year gone by.
In 2019, the FMCG industry witnessed slowdown in the rural sales, which was traditionally ahead of urban sales, and in the last two quarters it was half of the urban sales growth due to factors as liquidity crunch in those far flung markets and drop in gross domestic product (GDP) which had weakened household spending.
To overcome, FMCG makers have introduced low unit price packs in multiple categories to make their products affordable and have also introduced multiple promotions and offers.
The industry believes it to be short-term hiccups and expects to be back on high single digit growth in H2 (July-December) of 2020, helped by factors which includes government spending in infra projects and increased rural spending.
However, the experts say that it will also depend on GDP growth, commodity inflation, good monsoon, among others. The experts also opine that a high double-digit growth seems distant in 2020 for the FMCG sector.
"It should (FMCG) recover after two quarters. One or two quarters will remain tough and this all would be linked to GDP.
If GDP growth comes back to 6.5 to 7 per cent, then the recovery would happen. I do not see any big recovery in the first and second quarter," said Edelweiss Financial Services Executive Vice President Abneesh Roy.
According to an ITC Spokesperson: "India is a growth market and we are confident that consumption demand will pick up over time given the low levels of penetration and per capita consumption as well as the slew of recent measures announced by the government".
