Downtrading hits FMCG growth in September quarter

MUMBAI: Consumption in 5 out of the 6 FMCG categories tracked by retail intelligence firm Bizom was impacted in the September quarter, reflecting the scars of downtrading from pre-festive months.Although the tide appears to have turned last month ahead of the festive season, categories like beverages and branded commodities pulled down sales growth for the sector in the September quarter to minus 2.3% year-on-year due to the extended shadow of downtrading.Downtrading is a consumer behaviour where buyers switch from an expensive or bigger product to either low unit packs or lower-end brands. medium nocaption104481628High-value packs in branded commodities declined by around 5%, while low-priced products found favour with consumers — growing at 4.5% during the quarter. In packaged foods, the growth shifted from high-priced packs (-2.5%) to low- and medium-priced packs.Akshay D’Souza, chief of growth and insights, Bizom, said: “Among branded commodities, we see a sharp drop in prices YoY for some heavily consumed products such as edible oils. Beverages, on the other hand, have been impacted through the quarter on account of rains cooling temperatures.”Homecare products have seen a rise in sales driven by increased availability and placement of lower-priced packs. Confectionery and packaged food product sales have seen heavier stocking for the festive season which has helped shore up sales. Personal care witnessed a lower contribution of higher-priced packs compared to last year. High-value packs declined 13% with consumers shifting to mid-priced (9.8% growth) and low-price packs (3.3% growth).In a report, Kunal Vora, head (India equity research), BNP Paribas, said demand trends in the domestic market for the September quarter continue to mirror the trends seen in the previous few quarters. “While urban markets remained steady, elevated macro inflation and below-normal rainfall distribution in some regions impeded the recovery in rural demand that the market expected,” Vora said.An HDFC securities institutional research report said that with rural recovery remaining below expectations due to high food prices and below-normal rainfall, the FMCG sector is expected to witness a gradual recovery in demand. “Weak discretionary demand and delayed festive season (extended Shravan) are expected to particularly impact the summer portfolio of skin care, hair care, and other personal care categories. Packaged food volume recovery will be crucial... price hike benefits will be low,” it added.