September turns out to be a challenging quarter for Indian FMCG players
FMCG industry amid lukewarm consumer demand and a fall in rural consumption.
Sticky food inflation and uneven rains in some regions hurt demand during the quarter. Rural demand has continued to be sluggish, and some green shoots, which were visible in the preceding June quarter, seem to have fizzed out in the wake of adverse conditions.
In their September quarter earnings commentaries, top FMCG companies like HUL, ITC and Nestle flagged worry over uneven rains, the impact of crop output and rising prices of some commodities (wheat, maida, sugar, potato, coffee, etc).
As per ITC's statement, «Consumption demand has been relatively subdued, especially in the value segment and rural markets on the back of sub-par monsoons and persistent Food inflation, which saw a sharp spike during the quarter.»
Analysts said that sticky inflation has hit rural demand, which make up more than one-third of FMCG sales, because consumers are still going cautious on discretionary spending.
Nestle India's commentary also suggested an «adverse impact on pricing» due to the rain deficit mentioned above.
«Uneven rain and rain deficit is expected to impact production of maize, sugar, oilseeds and spices that may have an adverse impact on pricing,» Nestle India said, adding that «coffee continues to be volatile because of the global supply deficit.
The weather during the harvest of the Indian Robusta crop may impact production. Upcoming winter weather may impact wheat production», its commentary read.
During the quarter under consideration, while rural prospects were hit, the urban market continued its growth for the industry.
This good performance was led by modern trade channels and large packs. E-commerce continued to do well for Indian
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