The FMCG slowdown in Q2’20 saw a value decline of 19% as compared to the same period of 2019. This was fueled by massive disruptions in the production and supply chain, and low consumer confidence.
The unlock from Q3’20, saw a revival in the industry with a growth of 1.6% versus a year ago. The revival was aided by businesses opening up with the pandemic reaching stable levels. Markets started opening up in a phase-wise manner and store closures came down to an average of 3 days a month in Q3’20 from an average of 9 days a month in Q2’20. After being cooped at home for a long time, consumers also started looking at resuming normal consumption levels.
PRODUCT DYNAMICS
Staples Continues To Drive Growth: Personal Care & Home Care Move Towards Revival
With
the opening of the economy all baskets showed signs of recovery, albeit with some clear changes reflecting consumers’ product preferences. Consumers prioritized spending on essential foods during the locked down quarter and with the unlock quarter this accelerated to double digit growth.
We saw an interesting trend in the non-food (Home care & Personal care) categories too. The segment registered a movement towards revival with Unlock in Q3’20, indicating a need to move towards normalcy. With heightened consciousness around health and wellness, the ‘health & hygiene’ categories have become an integral part of the new normal of the consumers and continued to boom in Q3’20 as well.
MARKET DYNAMICS
Rural Continues To Drive Growth
With easing of pandemic and markets unlocking in various phases in the third quarter of the year, we saw recovery across town classes with the rural and Rest of Urban (ROU) regions continuing to lead growth. FMCG witnessed a double digit growth of 10.6% in Q3’20 in Rural India, while the bigger cities (>1 Lakh population including metros and Town Class 1) played catch-up.
The rural markets have bounced back handsomely on the back of support provided by the government as well as good agriculture, reverse migration and a lower unemployment rate.
Various favorable macro-environment factors have helped drive rural revival in Q3’20
- Government dialing up on rural stimulus in the form of increased MGNREGA allocation-
- 11% increase in average wages at an All India level (Sep vs Mar’20).
- 83L new households joined MGNREGA labour force
- ‘Garib Kalyan Rojgar Abhiyan’, support to agriculture and upskilling programs for migrant workers that returned to their villages.
- A bountiful monsoon also brought cheer to farmers with a record output in the kharif crop season.
Packaged Staples And Hygiene Categories Drive Faster Growth In Rural India
This has helped in increasing the purchasing power of the rural population, which is also reflected in the multiple times increase in spends within food and non-food baskets as compared to metros, with packaged staples and hygiene categories driving faster growth in rural India.
North Growing Fastest While West Continues To Be Under Stress
The impact of the pandemic on consumption patterns is also apparent in the zones of the country.
Higher rural population and lower incidence of COVID cases in the East and North zone have helped these zones recover faster. On the other hand, the West zone that has a relatively higher urban population and had higher severity of the pandemic continued to decline in Q3’20.
Traditional Trade & E-Commerce Gain, Modern Trade Impacted By Base Effect Of Big Day
Traditional trade & ecommerce channels increased in salience in the Q3’20 vs the pre- COVID period.
Traditional trade that was impacted by store closures during locked down bounced back with unlock aided by consumers preferring to shop closer home. Ecommerce continued on its growth momentum, especially in the metros, where its salience increased by 2 percentage points (a 34% increase in contribution) in Q3’20 vs Q1’20.
Modern trade on the contrary was impacted in this quarter. The continued closure of stores in malls and the muted Big Day sale of 15th August contributed to the significantly subdued August. However, with September, we see modern trade slowly moving towards recovery, with independent MT stores leading and already showing a 9% growth in Sep’20 vs Sep’19.
Source: Nielsen FMCG Snapshot Q3’20
