FMCG Industry Saw Consumption Slump In Urban Markets In 2021, Says Report

In 2021, the FMCG industry had to go for double-digit price growth in three consecutive quarters to protect its margins, which converted into a price-driven growth of 17.5 per cent

Nielsen in its report said that the FMCG sector was hit hard by higher inflation levels forcing firms to go for successive price hikes. Image: Getty

New Delhi: The fast-moving consumer goods (FMCG) industry in India saw a slowdown in consumption in urban markets and de-growth in rural areas in 2021, said Nielsen, data analytics company.

In its report, Nielsen noted that the sector was hit hard by higher inflation levels forcing firms to go for successive price hikes, PTI said.

In 2021, the FMCG industry had to go for double-digit price growth in three consecutive quarters to protect its margins, which converted into a price-driven growth of 17.5 per cent in comparison to a year ago in 2020.

Even in Q4 FY21, the FMCG industry witnessed a consumption de-growth of 2.6 per cent because of inflationary pressure and other macroeconomic factors, according to Nielsen.

The report said, “Higher inflation levels during 2021 have led to three consecutive quarters with double-digit price increase resulting in consumption slowdown in urban markets, and consumption de-growth in rural markets.”

The rural market, which contributes 35 per cent of the total FMCG sales was hit hard after the second wave. Several FMCG firms, including the market leader HUL, in their recent quarter results for the October-December period posted negative volume growth in rural markets.

Moreover, price rise continues to impact small manufacturers, where the number of small manufacturers, having a turnover below Rs 100 crore dropped by 13 per cent largely due to the difficulty of continuing operations with higher costs, the Nielsen report said.

However, large and medium manufacturers stayed stable through the year, it added.

In the past two years, 8 lakh new FMCG stores were added and more than half of that has come into the rural area. This pace of opening new stores is more than double of the pre-Covid years.

“The Metro-India retail store universe also grew, with newer stores opening up in residential areas to cater to consumers who were homebound for nearly two years,” it said. In the October-December quarter, rural markets continue to bear the brunt of price hikes.