In the first quarter of 2020, India's FMCG industry grew at 6.3 per cent (across Traditional trade, Modern Trade and E-Commerce) down from 7 per cent in the previous quarter, indicating continued growth slowdown and longer than expected recovery time for the industry. This growth was significantly impacted in March'20 with the initial effect of COVID-19 bringing growth down to 4 per cent. This led to a slowing down of overall growth for the quarter.
As early signs of stress on economic activity due to the pandemic began playing out in March, FMCG sector's overall value growth sharply declined to 4 per cent and volume growth was just at 0.5 per cent in the month, according to Nielsen.
Industry clocked a decent growth of 3 per cent in Q4, 2019 but growth slid to 2.7 per cent in Q1, 2020 due to the onset of COVID-19. This led to a slowing down of overall growth for the quarter.
Early signs of recovery and stabilisation were witnessed in rural markets and Metropolitan cities. Smaller towns in India, with less than 10 lakh population witnessed significant slowdown in March'20. The initial recovery in January and February'20 was driven by Food categories. In March, there was a significant slowdown across FMCG categories, more pronounced in Non-Food categories.
Industry clocked a decent growth of 7.5 per cent in January and February 2020 but growth slid to 4 per cent in March due to the onset of COVID-19. This led to a slowing down of overall growth for the quarter. FMCG growth for Q1'20 stands at 6.3 per cent against the Nielsen forecast of 8-9 per cent, and this quarter is turning out to be the lowest first quarter in the past three years.
The channel shifts are even more amplified in metros where traditional trade salience has dropped by almost five percentage points in the last one year from 73 per cent in Q1 of 2019 to 68 per cent in Q1, 2020.
The country's FMCG industry in the first three months posted the lowest first quarter growth in the last three years. In March 2020, the growth has declined to 3.4 per cent in town 1 cities, which is lowest in past three years.
Macro-economic indicators had exhibited early signs of recovery till the month of February'20, but the onset of COVID-19 impacted this trend in the month of March, 2020. The growth was restricted to only 2.7 per cent in March, 2020 as compared to the growth of 8.5 per cent in the months of Jan and Feb, 2020.
In January and February, the sector witnessed an initial recovery in rural markets driven by food categories. The slowdown was steeper in the urban markets compared to the rural markets, across the four zones. Rural areas contribute 36 per cent of total FMCG value contribution in India, highest among four zones.
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