FMCG sales volumes increased 4.3% on-year during the quarter, whereas HPC saw a marginal 0.2% growth, according to data from the market research firm.
Companies said there was a significantly higher growth in sales of branded packaged foods than their unbranded counterparts because of their lower share compared to other household products.
“Foods (segment) has a far more urban skew and also a little bit of top-down modern trade ecommerce skew. HPC has two issues going on,” said Saugata Gupta, managing director of Marico.
“One, the rural skew is far more and whenever there is high food inflation and consumption stress, home and personal care (HPC) gets more impacted than foods. Whenever there is high inflation, the premiumisation journey in HPC undergoes a shift of downgrade,” Gupta of Marica said on an earnings call.
In the past few months, companies have been reversing grammage cuts to bolster volume growth amid easing inflationary pressures. Most companies expect a steady increase in volume-led growth and recovery in rural areas as they look to slash product price tags.
The overall market expanded 3.1% year-on-year, with 5.3% growth in urban areas and 0.3% in rural, reversing the declining trend of the past six quarters.
“The drop in the rate of inflation overall in the economy has also led to a decline in inflation for food categories and given an opportunity to consumers to be cautiously optimistic. This can be seen in the shifts in consumption patterns in the quarter gone by, and by consumers that are now willing to buy more,” said Satish Pillai, managing director for India at NielsenIQ.
While the market research firm said the upward trends seen in rural markets are encouraging and may prove to be a turning point, companies have adopted a wait-and-see approach.
“By nature, foods are essential while several sub-segments within HPC are discretionary. Typically, any recovery starts with staples and foods before consumers start buying HPC products, especially in the premium space. While there are green shoots mainly from a rural standpoint, it does not indicate a complete recovery reversal yet,” said Koteshwar LN, business head at Flipkart Wholesale.
Sales in the non-foods segment turned positive in January-March after declining for six consecutive quarters. Large companies drove recovery in the segment with a growth of 0.6%, while small manufacturers saw their HPC products volume decline 1.8%.
