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    Packaged FMCG sales fall as prices rise

    Synopsis

    Data also showed, however, that some green shoots are visible in January, especially for staples, as consumers have been pantry-loading first in metros and now in smaller towns due to the third wave, with retailers increasing stock levels.

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    Packaged consumer-product volumes fell 1.8% in the December quarter, the second consecutive decline, as companies increased price tags to offset rising input costs.

    Volume indicates the number of products sold.

    Data also showed, however, that some green shoots are visible in January, especially for staples, as consumers have been pantry-loading first in metros and now in smaller towns due to the third wave, with retailers increasing stock levels. There has been a 6-12% incremental sales growth this month in these categories, which would have a positive rub-off effect on volumes as well.

    According to two industry executives quoting Nielsen data, the fast moving consumer goods market expanded 9.9% last quarter, completely driven by price-led growth of 11.7%. For the full 2021 calendar year, consumer goods sales grew 16% with volume expanding 5.1% largely due to a weak base of 2020 when the market fell about 2% by both value and volume terms.

    slow


    "We see an improvement in rural sales especially over the past few weeks as retailers buy more stocks to ensure availability as well as pantry loading by end consumers due to uncertainty in restrictions," said Angshu Mallick, chief executive of Adani Wilmar, owner of the Fortune brand.

    Sales expanded 25% for staples and 7% for edible oil. "Last year, a bulk of the value sales was driven by price hikes especially in edible oil but prices have corrected significantly," he said.

    An email sent to Nielsen to confirm the data remained unanswered. HUL, Britannia, ITC, Godrej Consumer, and Dabur have warned in recent months that prices would continue to rise amid the highest levels of inflation in decades. The price of everything from soaps to skincare products has gone up already by 10-15%, and companies warned that price spikes could continue.

    Last week, Hindustan Unilever, quoting Nielsen data, said the overall consumer goods market declined in terms of volumes, led by rural markets.

    "FMCG market growths are moderating and consumers are titrating volumes owing to the significant inflation that they are witnessing. Further, the inflationary conditions are likely to persist in the near-term. In fact, we expect to see sequentially more inflation in the March quarter compared to December quarter," Sanjiv Mehta, chairman at HUL, said during an analyst call.

    The third Covid wave from end-December in the metros and now in the districts have pushed up demand for essentials and staples. Industry executives believe the uptick of January will continue in February until Covid cases peak in the country.



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