- As per the report, FMCG Sector slow down started back in 2016 but it was hidden due to different issues. The report clearly pointed out that the slowdown in growth started in the fourth quarter of fiscal 2018-2019.
- Despite festive season round the corner and a good monsoon gave hopes for the revival of FMCG Sector, the report predicts a slump in the revenue growth.
Companies of Fast-Moving Consumer goods (FMCG) companies are moving towards their worst revenue growth in the last 15 years as the slowdown in the sector is increasing due to rising unemployment, liquidity crunch, lower farm incomes, and problems across all sectors in the Indian economy mentioned a report by Credit Suisse.
As per the report, FMCG slow down started back in 2016 but it was hidden due to different issues. The report clearly pointed out that the slowdown in growth started in the fourth quarter of fiscal 2018-2019.
The revenue growth started to decline from 11 percent in the third quarter of 2018-19 to 7 percent in the first quarter of the current fiscal. Growth is likely to fall around 5 percent in the second and third quarter of this financial year.
“This will make FY20 the slowest year of growth for FMCGs in 15 years. The last period of such low growth was 2000-03,” the Credit Suisse report. It also pointed out that some of the elements of the slowdown were seeded in 2016, 2017, and 2018.
The report explained that the slowdown started in 2106 but it was camouflaged by trade disruptions due to demonetization and GST, and then by the low base effect which led to the increase in the slowdown in financial year 2019.
With the Indian economy growing at its slowest pace in the last six years at 5 percent during April-June, the agriculture sector expanded merely at 2 percent during the period. FMCG companies are depending on rural India now which home to almost 800 million people for fuel growth.
Despite festive season round the corner and a good monsoon gave hopes for the revival of FMCG, the report predicts a slump in the revenue growth.
The firm predicted how different brands which will perform badly or will gain market share too. It said Britannia’s sales of biscuit has slow down sharper than the FMCG average. The cookie maker makes 80 percent of its revenue from the biscuits business. Last month, Varun Berry, the managing director said that consumers are thinking twice before buying a 5 Rs. biscuit pack too. The report also degraded Pidilite to underperform and the slowdown in real estate linked business.
The report mentioned that expect few firms such as Nestle, Colgate, and Dabur no one will be immune from the slowdown. It predicts that Nestle will grow and gain market share.
It also expects Dabur to grow more and ahead of its competition because of brilliant company-specific plans and the loss of share of rival Patanjali.
Colgate is likely to grow ahead in the oral category growth as it focuses on the natural shares and Patanjali has lost shares.
This report sends a worrying sign of the slowdown of the Indian economy. This news comes after the automobile industry already reported the slowdown there and the dying dealers.