Rural slump to slow FMCG growth to 11-12% in 2019

Mumbai: The fast-moving consumer goods industry is likely to grow at a slower pace of 11-12 percent in 2019, almost 2 percentage points lower than in 2018, primarily driven by the steeply falling rural demand due to the lingering farm distress, says a report.

The industry is also expected to grow at 12-13 percent in the June quarter, market research agency Nielsen said in a report Wednesday.

The sector grew at 13.6 percent in the first quarter.

But there is a softening of volume growth to the tune of 100- 200 basis points, still helping to grown in double-digits in the first half. More importantly, the second half will see more strain leading to high single-digit growth, it said.

The volume growth which peaked in 2018 to 11 percent is expected to be healthy but lower at 8.5-9.5 percent in 2019, the report added.

It said this is not surprising as similar fall is seen in the economy as a whole which grew at a lower 6.6 percent in the December quarter, against an expected 6.8 percent.

Inflationary pressure is also seen mounting in recent months from a little over 2 percent in January to 2.9 percent in March 2019, the report added.

While there is only a slight drop in urban volumes, there is a significant softening of demand trend in rural markets which has been dampening the overall industry growth from the third quarter of 2018 to the first quarter of 2019.

Historically, rural markets has been growing 3-5 percentage points faster than their urban counterparts and the recent slowdown in rural growth has brought growth rate closer to the urban level, the report added.

The overall drop witnessed in rural growth is majorly driven by slowdown in packaged food category, it

noted.