FMCG India Volumes Fall 2% In June Quarter As 68% Of Categories See Decline Amid Weak Rural Demand: Report

India's Fast Moving Consumer Goods (FMCG) volumes fell 2% year-on-year in the June quarter, with 68% of categories recording a decline, pointing to a broader slowdown in consumer demand, according to NielsenIQ. Rural FMCG volumes fell 5% during April-June, while urban volumes remained flat.

FMCG value growth was limited to 0.8% during the quarter, despite a 2.8% increase in prices. The gap was sharper in traditional trade, where volumes fell 6% and value declined 4.2%. Urban markets, by comparison, recorded 3% value growth, according to the NielsenIQ quarterly snapshot.

The decline was spread across the wider consumption basket. Volumes fell more than 5% in 38% of FMCG categories, while another 35% of categories saw declines of 2-5%. Washing powders, detergent liquids and bars, refined oils and toilet soaps were among the categories with sharper volume declines, while biscuits, salty snacks, shampoo and iodised salt also saw volumes fall.

Reasons Behind FMCG Volume Decline

The June-quarter slowdown came as consumers faced higher prices and a tougher cost environment, while rural demand remained weak.

June rainfall was 40% below normal, with delayed sowing and higher fertiliser costs adding pressure to rural incomes. Crude oil prices also crossed $100 a barrel during the month, raising transportation and other supply-chain costs.

The impact was more pronounced in categories that depend heavily on traditional retail and lower price points. NielsenIQ said categories sold through ₹5, ₹10 and ₹15 price points were among those facing greater pressure.

Higher input costs have also forced FMCG companies to make selective price increases. Companies raised prices by around 2-5% in the June quarter to offset part of the increase in costs, but most are now looking to avoid another broad-based increase during the festive season.

FMCG Categories Under Pressure

The slowdown was not limited to a handful of products. NielsenIQ classified 38% of categories as having a high-impact decline of more than 5%, while 35% fell into the medium-impact group, with volumes down 2-5%.

Washing powder, detergent liquids and bars, refined oils and toilet soaps were among the high-impact categories. Iodised salt, biscuits, salty snacks and shampoo were among those in the 2-5% decline group.

Only 8% of categories recorded volume growth during the quarter. Vermicelli and noodles, packaged rice, hair oils and liquid toilet soaps were among the categories that grew.

The report said categories with a greater presence in modern trade and lower price increases were relatively less affected, while categories dependent on traditional retail and lower price points saw greater pressure.

E-Commerce And Modern Trade See Stronger FMCG Growth

The weakness in traditional retail was partly offset by growth in modern trade and e-commerce. E-commerce recorded 34.8% volume growth and 57.7% value growth in the June quarter, while modern trade volumes rose 17.5% and value increased 15.5%. The shift was particularly visible among consumers in metro and tier-I cities, according to NielsenIQ.

E-commerce accounted for around 7% of FMCG sales nationally during the quarter. The numbers point to a widening gap between traditional retail and newer channels, even as the overall market remains under pressure.

FMCG Stocks To Watch

The June-quarter data puts Hindustan Unilever, ITC, Nestle India, Britannia Industries, Dabur India, Marico and Godrej Consumer Products among the FMCG stocks to watch. Their exposure to rural consumption, mass-market products, premium categories and different distribution channels varies, so the impact of the volume slowdown will differ across companies.

ITC has indicated that it intends to hold prices through the festive season despite higher commodity costs, while Dabur has taken calibrated price increases on select products. Industry executives have said companies are prioritising volumes over margins for now as they enter the festive period.

The pricing approach could change later in the financial year if commodity costs remain elevated. ITC's Foods Division CEO Hemant Malik has said companies may have to consider price corrections in the third or fourth quarter if cost pressures persist.

FMCG Sector Outlook

The September quarter and the festive season will be important for the sector after the decline in June-quarter volumes. Rural consumption, the monsoon, commodity prices and the recovery in traditional retail will be key indicators.

For FMCG companies, the immediate trade-off is between protecting volumes and absorbing higher costs. Holding prices could support festive demand but put pressure on margins, while further price increases could weigh on consumption in more price-sensitive categories.

The continued shift towards e-commerce and modern trade will also remain important. If these channels continue to grow faster than traditional retail, companies with stronger exposure to organised and online distribution could see a different sales mix from those more dependent on general trade.

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