Even as July-Aug volume falters, FMCG firms grow in revenue
The FMCG market grew 6.2% in July based on sales revenue, but volume – the number of products customers put in their shopping carts – fell 1.8%, industry executives said, citing data from market research firm Nielsen. In August, the market expanded 21.7%, but volume grew at a much slower pace of 7.5%. Nielsen has not released the September month data yet.
“The underlying demand has not faded away, though Nielsen’s last few readings do indicate that market growth has slowed down, especially in rural areas,” Sanjiv Mehta, chairman at FMCG market leader Hindustan Unilever, told ET last week.
In its earnings call, highlighted that rural market growth for FMCG as per Nielsen had seen a substantial slowdown in August and September at 2.5% compared with the January to July period when it was more than 12.5%. In contrast, urban consumption has held on much better due to easing of pandemic-related restrictions.
Nielsen data sourced from industry officials also suggested that August had a weak base last year – sales revenue had fallen 7.2% with volume declining 6.6%. July 2020 had a comparatively stronger growth of 8.6%.
Since last year, the prices of inputs such as palm oil, crude-based derivatives, freight and tea for the FMCG industry have seen an unprecedented surge. Palm oil is now 80% higher than in March last year, while crude and tea prices have increased by more than 50%. Also, freight costs are five times higher than what they used to be pre-pandemic.
As a result, companies have been increasing prices across categories by 7-10% to offset rising input cost.