FMCG hits high note again

Listed FMCG manufacturers in the April, May and June quarter (AMJ) of 2018 have witnessed growth of 10.9% as compared to the same quarter over a year ago. With this, the FMCG industry growth stood at 11.6% in the monthly average total (MAT) in June 2018. And nearly 70% of this is driven by consumption volume, states a recent report published by Nielsen India. Reiterating improved consumer sentiment, leading FMCG company Dabur said it has achieved highest-ever volume growth of 21% during the mentioned quarter. “Our India FMCG business, in fact, reported highest-ever volume growth of 21% during the quarter,” revealed Lalit Malik, Chief Financial Officer, Dabur India Limited. Dabur’s comparable standalone India revenue for the quarter grew by 24.7%.

The company reported standalone India revenue of Rs 1,473.1 crore in Q1 of 2018-19. The company’s shampoo business ended Q1 with growth of over 30%. Dabur’s honey sales continued to report strong gains, growing by around 42%, thus driving the health supplements category growth to 27.5% in Q1. The skin care category grew by 27.1% while the foods business, led by strong demand for packaged juices, posted an over 26% growth during the first quarter. According to the company, the digestives business also grew by nearly 22% during the first quarter of 2018-19 while the home care and oral care businesses reported over 17% growth.

Growth Stories All Around
Parle, another leading FMCG company, has achieved 13% growth in the AMJ quarter in comparison to last year’s quarter, said Krishna Rao, Senior Category Head, Parle Ltd. “There has been increased activity because of higher disposable income in the rural markets. Because of the government provided schemes and initiatives, the wallet size of rural people has increased manifold, which is being reflected in the consumption. Also, there is larger intent of buying through digital wallets and this is happening across both rural and urban markets. Convenience too is playing a major role with consumers from rural markets paying through e-wallets too,” Rao elaborated.

Meanwhile, Hindustan Unilever Limited said it has witnessed double-digit volume growth across divisions such as home care, beauty and personal care, and food and refreshment, among others. Its home care division reported 20% comparable sales growth in the quarter ended June 2018. Beauty and personal care reported 14% comparable sales growth with broad-based growth across personal wash and personal products. Likewise, its food and refreshment achieved 14% comparable sales growth, this strong upward curve led by tea, ice cream and frozen desserts.

“The trade dynamism triggered by demonetisation and GST rollout has almost settled down. As a result, the April to June 2018 quarter witnessed strong shipment growth on the back of a low base of last year,” said Sameer Shukla, Executive Director, Nielsen India. “Meanwhile, retail off-take continued to be buoyant with double-digit growth on the back of tailwinds viz. GST rate cuts, strengthening macro-economics, and robust monsoon projections. Also, the retail stock levels have risen and now stand at higher than pre-demonetisation level; modern trade channels are showing very high growth and rural growth has picked up as cash is back in the market,” Shukla added.

Moreover, Nielsen projects that growth trends between FMCG manufacturers’ shipments and retail off-take will come closer to each other in the current quarter. However, shipment growths will continue to be tad higher than consumer off-takes for the next few months, owing to the cyclical relationship between the two. “Looking at the overall macro-economic scenario and FMCG industry dynamics, Nielsen forecasts the industry growth in 2018 to be around 12-13%, which is closer to the growth range witnessed by the industry in 2017. The economic momentum is expected to gather pace through the second half of 2018, benefiting from a favourable economic and policy environment,” he added.

Key Findings
Some of the key findings of the report are:
•    Retail stock levels have jumped to levels higher than the pre-demonetisation period. Demonetisation woes and uncertainties around GST had created short-term stress on retail stock levels. With the passage of time, retail stock levels have bounced back and stand at a higher level from the pre-demonetisation period.
•    Modern trade channels have bounced back. This growth in modern trade (MT) channel is fuelled by store universe expansion and better activation through multiple big days or weeks and general consumer promotions.
•    Rural to urban growth differential picks up again. With wholesale channels bouncing back, FMCG growth in rural markets has gradually picked up. As a result, the growth differential between rural and urban areas has reduced.
•    There is a rise of the local giants. An analysis of growth among FMCG manufacturers with more than Rs 1,000 crore annual turnover suggests that in 2016, seven among the 10 fastest growing companies were of Indian origin; the number went up to nine in MAT June 2018.
•    The trend of naturals continues in personal care. With increasing awareness among consumers about wellbeing and the association between natural ingredients with health, Indian consumers have shown a growing affinity towards FMCG brands having ‘naturals’ proposition. This trend continues and the natural segment continues to show healthy growth of 20% (MAT March 2018 versus a year ago) – almost three times that of the non-natural segment.

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