FMCG growth takes a hit during lockdown

Image: Mansi Thapliyal / Reuters

After showing early signs of revival at the start of the year, the FMCG market took a hit in March with the onset of the Covid-19 outbreak and the subsequent lockdown. FMCG growth for Q12020 stands at 6.3 percent against Nielsen’s forecast of 8-9 percent at the start of this year.

Nielsen has revised its full year 2020 growth forecast to 5-6 percent from 9-10 percent. It considers the January-December period for calculating growth numbers.

The market research firm noted “distinct signs of recovery” in January and February. Rural markets and metropolitan cities, in particular, showed signs of recovery during this“pre-Covid” period, largely driven by food categories. March, however, brought with it a slowdown across FMCG categories, especially non-food categories. “The intensity, severity and longevity in terms of how this lockdown will be phased out will play a key role in determining the impact,” said Nitya Bhalla, data science leader, South Asia, Nielsen Global Connect, at a virtual press briefing.

That said the market research firm expects FMCG growth for the second half of 2020 to be 5-6 percent.

Bhalla, however, warns of headwinds, including a drop in consumption, especially discretionary spends; rising unemployment and its impact on disposable income and hence demand; widening fiscal deficit as a result of reduced tax revenue and increased government spending on Covid-19; and a fall in manufacturing and industrial production due to the lockdown. GDP as a result is expected to shrink to 1.5-2.8 percent in FY20.