Nielsen's annual FMCG report: an overview

Nielsen India has unveiled its eighth edition of the Quarterly FMCG Snapshot, released for Q4 2019 (October, November and December). The note highlights the growth of FMCG across general trade in India, modern trade and e-commerce.

The report suggests that FMCG has shown a growth of 7.3 per cent across general trade, modern trade and e-commerce for Q4 2019 (marginally lower than growth in the last quarter). While indicating that the slowdown is showing signs of steadying, the report also points out that for the full year (2019), the value growth was at 9.2 per cent as opposed to 13.5 per cent in 2018.

Commenting on the state of the FMCG industry and its perceivable future, Prasun Basu, South Asia Zone president, Nielsen Global Connect, said, “2019 has been a tough year for the FMCG Industry with an over four point decline, but we do see it stabilising in the last quarter of the year. A mix of macro economic factors, and channel and zone factors driven by manufacturers, coupled with consolidation of smaller players have been instrumental in the slowdown. A lower pace of innovation has further limited consumer demand pick up. However, 2020 offers a stable outlook for the industry arresting the 2019 decline.”

Here are some quick pointers from the report:

FMCG SLOWDOWN ARRESTED IN Q4’19

The last quarter of 2019 saw the FMCG industry grow at 6.6 per cent (7.3 per cent with e-commerce), indicating an arrest as against the sharp slowdown witnessed in the previous quarters.The same period a year ago was a high double digit (15.7 per cent in Q4 2018). This stress in industry growth is also witnessed in the Macro-Economic environment with:

• GDP growth slipping further to 4.5 per cent in Q3 2019 from five per cent in Q2 2019

• Consumer Price Inflation jumping to 5.8 per cent in Q4 2019 from 3.5 per cent in Q3 2019 (reaching a high of 7.3 per cent in December 2019)

• Spurt in job losses/rising unemployment leading to the general acceptance of the downturn

• Untimely and excess rainfall impacting farm produce adversely in some states.

MODERN TRADE AND E-COMM HELP SUSTAIN OVERALL GROWTH

This quarter, organised retail continued its rise with both Modern Trade (15 per cent growth in Q4 2019) and e-commerce channels (53 per cent in Q4 2019) inching up on account of affordable pricing and festive pickup.

Traditional Trade, the highest contributing channel to FMCG with 90 per cent contribution witnessed significantly slower growth Q4 2019 (5.7 per cent vs 16 per cent in Q4 2018). This drop is led by shrinkage of consumption indicated by a 10 percentage point drop in volume growth (from 12 per cent in Q4 2018 to 2.6 per cent in Q4 2019).

WEST ZONE CONTINUES TO DIP, WHILE OTHER ZONES STABILISE

In the last quarter of 2019, the North, East and South maintained stable growth against the previous period. However, the West Zone showed a decline.

The West zone had a 4.6 per cent value growth (down from 15 per cent in Q4 2018 and 6.3 per cent in Q3 2019). The slowdown in the zone was led by shrinkage in volume growth which became almost flat at 1.1 per cent in Q4 2019 (11 per cent in Q4 2018). The urban market and General Trade are the key drivers of the slowdown in the West, while Modern Trade continues to grow.

FULL YEAR 2019 REVIEW:

After two years of double digit growth, FMCG growth slowed down to single digit growth in 2019. In the calendar year 2019, FMCG witnessed 9.2 per cent growth (excluding e-commerce), down from 13.5 per cent in the previous calendar year. The growth trend was dampened by drop in volume growth (down to 5.8 per cent from 10.5 per cent in 2018) while price led growth is sustained at 3.4 per cent.

• For the full year 2019, the slow growth was led by the rural market - and growth slipped to nearly half of the previous year. (16.2 per cent in 2018 to 8.8 per cent in 2019).

• Comparing zones over the one year period, while North and West were most affected, South sustained its growth levels. There were diverging trends at play - with the North contributing 30 per cent; West 24 per cent and South 25 per cent to the overall FMCG basket.

• 45 per cent of the slowdown is led by small players ( < Rs 100 crore), driven by fewer new manufacturers entering FMCG space, with the existing decline in distribution and significant slowdown in innovation.

OUTLOOK FOR 2020:

FMCG growth for Q4 2019 stands at 7.4 per cent against a prediction of 6.5 – 7.5 per cent (including e-commerce). All India FMCG full year growth for 2019 stood at 9.7 per cent, which is in line with the prediction of nine per cent - 10 per cent. In 2020, we can expect first quarter (Jan-Mar 2020) FMCG growth to be in the range of eight- nine per cent. First quarter of 2020 is expected to be marginally higher than fourth quarter. Quarter One 2020 would be the lowest first quarter in the past three years. The forecast for the full year is a stable nine to 10 per cent growth.

Here is the full report:

Q4 2019 FMCG Final Deck.pdf