InvestorQ : How were the volume and value numbers for FMCG stocks in the June 2022 quarter?
Sam Eswaran made post

How were the volume and value numbers for FMCG stocks in the June 2022 quarter?

Moii Chavate answered.
2 weeks ago

In the last few weeks, FMCG stocks have had a good time on the bourses. In the June quarter, most of the FMCG players managed to grow their top line. This was done by using price hikes to offset impact of higher input costs. But that is just the apparent story. A recent study by Nielsen throws up some interesting perspectives on the FMCG space in India. The gist is that while FMCG products like packaged foods, beverages and toiletries revived in June 2022 quarter, it was driven by urban markets and not at all by rural markets.

In the June 2022 quarter, the volume position improved but continued to contract at a lower pace. But the similarity with the March 2022 quarter was that the growth in the top line was still be drivnen by price hikes and not by volumes. In June 2022 quarter, volume growth was negative at -0.7% against -4.1% in March 2022 quarter. However, FMCG industry sales revenues saw 10.9% rise in the June quarter. In short, the sales alpha if we may call it so is still coming from growth in price rather than growth in volumes.

There is an interesting trend visible in the June quarter. Sale of FMCG products via hypermarkets and supermarkets grew volumes by 7.8% in June 2022 quarter compared to 5.5% in March 2022 quarter. However, in this period, traditional Kirana stores saw volumes contract by -4.9% in the June 2022 quarter and by -1.5% in the March 2022 quarter. There is a big shift towards organization of the retail FMCG business and th hypermarkets and the supermarkets are taking away most of the cream of the market, against Kirana shops.

In June 2022, there was a sharp 9% growth in the unit growth for the entire FMCG sector. This is an interest trend as it shows that consumers are buying smaller packs and more units. It does look like the FMCG buyers are more comfortable buying half-KG packs where they were formerly buying 1-KG packs. This miniaturization of demand is more potent in rural areas. The fall in pack size was also more visible in the non-food segment than in the food segment where people make fewer compromises.

Year 2022 is still tepid compared to the year 2021. In the first half of the year 2022, FMCG products saw value growth of 8%, which is sharply lower than the FMCG value growth of 17.5% in 2021. But there is a lot of optimism about the second half of 2022. FMCG segment demand is normally robust in the second half of the year due to the festive season and a higher degree of normalization of the monsoons. That should give the necessary push to consumption patterns for the FMCG sector. The outlooks appears to be bright for sure.