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FMCG industry to see a flat growth in 2020; June shows green shoots

During the months of April-May, because of the lockdown, the traditional stores were closed for 11-12 days, and by June the closure was only for five days, thereby increasing the availability of products

twitter-logoAjita Shashidhar | July 30, 2020 | Updated 19:20 IST
FMCG industry to see a flat growth in 2020; June shows green shoots
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The FMCG industry in India would witness a flat growth of around 1 per cent in 2020, according to Nielsen Global Connect. The agency, earlier this year, had projected a growth in the region of 6.3 per cent, which it has revised post the impact of COVID-19 during the months of April and May. The FMCG industry during the months of April-May-June degrew by close to 17.1 per cent. The worst months for the industry were April and May when the market degrew by 28 per cent. June, which was the first month of Unlock 1.0, however, witnessed green shoots, with the industry growing by 4.5 per cent (over June 2019).

During the months of April-May, because of the lockdown, the traditional stores were closed for 11-12 days, and by June the closure was only for five days, thereby increasing the availability of products. Traditional trade, which degrew by 31 per cent in April-May, bounced back in June with 5 per cent growth (over June 2019), while modern trade (with lot of stores located in malls), saw a 4 per cent de-growth in April-May and June saw a further degrowth of 6 per cent. COVID-19 has definitely worked in favour of e-commerce. Its growth in April-May declined to 3 per cent due to supply chain disruptions, but by June e-commerce had made up for the previous months' slow growth, by growing at 38 per cent.

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The outlier in 2020 has been rural India and tier 2-3 markets. With less COVID cases in rural India compared to urban, the consumption appetite has been far higher. While the average store closure days in metros were around 13.5 during the months of April and May, in rural India, these were hardly seven. FMCG de-growth in rural India during April and May was at 23 per cent and by June it saw a 12 per cent growth. In the metros, the de-growth in April and May was at 27 per cent and in June the degrowth reduced to 4 per cent.  

The growth in rural consumption has been due to a variety of factors such as the Rs 40,000 crore increase in MNREGA allocation, policies such as Garib Kalyan Rojgar Abhiyan and the upskilling of three lakh migrant workers. These initiatives have resulted in more money in the hands of rural consumers and of course, the normal and timely progression of monsoon has lifted their sentiments up. The Rabi harvest in April was good and with a good monsoon, Kharif harvest is expected to be good too.

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Rural consumption was almost flat pre-COVID, so will the growth sustain? Prasun Basu, President (South Asia Zone), Nielsen Global Connect, expects higher growth in rural consumption in the coming months. "The only bit that one needs to be cautious is that with the country unlocking, we are going to see more reverse migration and that shouldn't impact rural (in terms of infection)."

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