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Kiranas or neighbourhood stores, which contribute more than 85% of sales of fast-moving consumer goods companies, saw orders placed with companies decline 7.5% in November from a year earlier.
This is because retailers are left with excess inventory from pre-Diwali orders, which, however, failed to generate enough demand, especially in rural areas.
Orders also fell 3.5% compared to the previous month October, according to Bizom, which analyses data based on orders at nearly 7.5 million kirana stores.
“Demand has been challenging over the past few months and last month’s decline may have been triggered by uncertainty in consumer sentiment, especially in states where elections were due. Recovery will be seen only when there are visible greenshoots in rural markets,” said Sushil Kumar Bajpai, president, RSPL Group, which makes Ghari detergent and Venus soap.
FMCG companies had indicated that consistent decline in rural markets had halted in the September quarter but deficient rains, followed by a spike in food prices affected the second part of the quarter. Sales in villages fell 9.6% year-on-year in November, more than the 3.5% decline in cities, said Bizom, which expects rural consumption rebound to take slightly longer.
“As we move deeper into the winter, we expect to see winter products such as skin creams, room and water heaters, hot beverages, etc across categories to build up greater stock at stores as consumers start lapping them up with falling temperatures,” said Akshay D’Souza, chief of growth and insights at Mobisy Technologies, which owns Bizom.
The month-long festive season from Navratri till Diwali, across Durga Puja, Dussehra, Karva Chauth and Dhanteras is the largest consumption period in India, accounting for a third of annual business for most consumer electronics companies.
Sales of home appliances such as refrigerators, washing Sales of home appliances such as refrigerators, washing machines and air-conditioners grew sequentially by 15-16% both by value and volume in November, as per industry estimates, due to Diwali purchases and higher sales of mid-to-premium segment in urban and semi-urban markets.
However, sales of mass and entry segment products were flat sequentially.
On a year-on-year basis, the categories grew by 80-85% as Diwali was a month early in October last year and hence, not comparable. However, when compared to 2020, when Diwali was in mid-November, the overall market was flat this year and sales of entry mass segment products fell by around 8-10%, industry executives said.
“Contrary to expectations, Diwali witnessed subdued enthusiasm for the FMCG sector. Post-Diwali sales have historically been low. Particularly hard-hit segments are chocolates, confectionery and biscuits, followed by beauty, and cosmetics,” said Dhairyashil Patil, national president of All India Consumer Products Distributors Federation (AICPDF).
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