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Market Analysis
FMCG Market value drops to 7.3% in Q3 due to major drop in rural demand: Nielsen India FMCG Growth Snapshot

Nielsen India FMCG Growth Snapshot for Q3 (July to September 2019) has stated that country's FMCG market value growth has dropped to 7.3 per cent in Q3 2019 against 16.2 per cent in Q3 2018 with the rural growth dropping below urban growth for the first time in seven years due to the prolonged agrarian distress, uneven rainfall spread, and stagnant rural incomes that has severely hit sales of branded packaged goods.

Rural India contributes 36% to overall FMCG spends and has historically been growing 3-5% points faster than urban. This was the first time in seven years that consumption growth in rural areas was slower compared with that of urban markets.

In July-September, rural consumption grew at 5% compared with a 20% growth it clocked in Q3 of 2018. Nielsen said urban India grew at a better pace with an 8% expansion against 14% growth in Q3 of 2018. ".in recent periods, rural growth is slowing down at a much faster rate compared to urban," Nielsen's report on Q3 FMCG growth snapshot said.

The overall FMCG market clocked a value growth of 7.3% in Q3 of 2019 compared with a 16.2% growth in Q3 of 2018.

Notwithstanding the slowdown, Nielsen has retained its annual growth forecast for 2019 for the FMCG market at 9-10%. In the last quarter, it had revised lower its earlier growth forecast of 11-12%.

Analysts at Nielsen have warned that demand could cool further in the October-December quarter, before seeing an uptick starting January.

Nielsen follows a January to December financial year and tracks branded fast-moving consumer goods in 86 categories across urban and rural India.

North suffered the most while South sustains:

The slowdown was more pronounced in northern India. The south zone has been able to hold on to the value growth in Q3 2019, the report found. "Macro-economic factors are helping the South sustain growth levels. Urban strata in the South has witnessed upside in growth from 10 percent in Q3 2018 to 12 percent in Q3 2019, while rural growth has dropped by 6 percent during the same period. Food essentials categories emerge as key growth drivers for the South urban market through an increase in consumption. Small players, along with large manufacturers, have been able to sustain an overall value growth in the South," it said.

High per capita GVA (gross value added) clubbed with low unemployment are favouring sustained growth in the south zone as compared to the north zone, it explained.

The unemployment rate in the north has surged by 14 percent, primarily driven by sectors like the automobile, ancillary and farm and non-farm lower income levels in rural, it said. Meanwhile, the unemployment rate in the south Zone is the lowest across zones, the report stated.

Dailyhunt
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