The country's FMCG market is expected to stabilise and grow 9-10% in the Jan-Dec calendar year similar to the previous year, Nielsen said. Early signs of stability, macro economic policies, manufacturer action and consumer sentiment is expected to lead money in the hands of the consumer thereby fuelling consumption, the market research firm forecasted.
What are the key factors defining Nielsen's stable outlook for the year?
If you look at the macro indicators, lower inflation is what's being forecasted and we are expecting unemployment to stabilise. If there's not much of a rainfall challenge, we are cautiously optimistic that this year will be better than the previous one. The other factor has been commodity prices which rose steeply last year; so input costs went up significantly for manufacturers. That hit all manufacturers, and more so the smaller ones who anyway operate on tighter control. If commodity prices don't get as bad as they did in 2019-20, then the challenge that manufacturers, specially small and mid-sized ones face, will be lesser to that extent. And then there is the government stimulus, improvement in global ranking in ease of doing business, expectations from the Budget through tax cuts and a stable exchange rate. All these are conducive factors which indicate a stable consumption outlook. Data shows that FMCG growth is stabilising. Better sales on e-commerce platforms, deep discounts, and consumer schemes offered by online retailers have also been a factor. Besides, modern trade helped sustain overall growth.
Was the fourth quarter the turning point for the sector?
While the numbers in the fourth quarter are net to net lower, the point to note is that the decline started to flatten out – that's what we are saying. The fourth quarter is not better; but growth rate of the fourth quarter is only marginally lower than the third quarter. The slope of the sharp decline in growth rate is starting to flatten out. There was a massive drop through the year – that massive drop has started to stabilise.
Was 2019 the worst year for FMCG?
It was not the worst year. In 2014, 15 and 16, annual growth rates hovered around 7-9%; for 2019, we are saying 9.7%. Among other factors, we're coming on the back of an election year. It was a protracted year in that sense. The election process itself was a couple of months; then there was the formation of the government, followed by the budget. So the entire process took a large part of the year; the year was in a bit of a standstill mode from an overall positive public thrust. It was an unusual year. Typically, we do find that in an election year, growth rates go down marginally – by half a point or one point on average. If you look at the last three elections – that's been the trend more or less over the past 15 years. So we need to factor that in.
Has rural growth bottomed out ahead of urban growth?
We definitely believe that rural growth has bottomed out; the numbers already show that. The growth rate of rural in the fourth quarter was the same as the growth rate of rural in the third quarter. We cannot yet make that claim about the urban market.
What is the outlook for the first quarter?
For a large number of companies, the first quarter, or the January-March quarter, is the closing quarter of the year. So there's a lot of focus that manufacturers give to maximise the year closure. That adds extra stimulus, more promotions, launches. That plays out and creates positive consumer demand. Usually, Jan-March quarters are empirically better than the October-December quarters.
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We are cautiously optimistic about FMCG growth this year: Nielsen's Prasun Basu have 1003 words, post on economictimes.indiatimes.com at January 22, 2020. This is cached page on Talk Vietnam. If you want remove this page, please contact us.