“The average basket size in (the year ended) September 2018 was 222 kg while it dropped 3% to 217 kg in 2019,” said K Ramakrishnan, South Asia MD at Kantar. “But spends have gone up 2% from Rs 14,724 to Rs 15,015 in the same time frame.”
Most companies increased promotions in 2018 by offering additional grammage or bigger packs while keeping prices intact. However, these could have been withdrawn or normalised in 2019, resulting in divergent value and volume growth trends, companies said.
“Even if we sold the same number of packs in both years, volume will still show a drop in 2019 as additional grammage will reflect only in the base year,” said B Krishna Rao, senior category head at Parle Products. “Also, there could be a shift from large packs to smaller ones, which impacts volume growth.”
India’s economy expanded 4.5% in the September quarter, the slowest in more than six years, pulled down by manufacturing, which contracted 1% in gross value added against a 6.9% increase a year earlier. Consumer goods have been hit by stress in rural demand — which accounts for about a third of the market and has been outpacing urban sales — due to lower farm incomes and liquidity constraints that have squeezed the wholesale channel.
“There are issues around overall economic growth, agrarian income, impact and outflow in the banking situation,” Nestle India chairman and managing director Suresh Narayanan told ET last week.
Steps by the government to revive the economy could have a knock-on effect on consumption.
“The government has looked at areas like taxation (and) ease of doing business among other things,” Narayanan said. “If some of the measures that the government is contemplating also leads to more money in the hands of consumers, hopefully recovery should happen.” In a trend reversal, edible oil, tea, spices, snacks and atta, among others, have seen a shift to branded products from the unorganised market. The items cited above have seen a 5% decline in unbranded products even as the overall categories grew. Branded products account for less than half the overall consumption of many commoditised segments. Local and unbranded products, which are cheaper, have been nibbling away at the share of leading consumer product companies for years. Kantar data also revealed that in categories that have at least 50% penetration, consumers have started buying them on two extra occasions during the year but in smaller quantities each time. For instance, shopping occasions for biscuits grew from 40 last September to 48 times this year; the purchase quantity per visit dropped to 117 grams from 138 grams.
