Indian companies making everyday use products (FMCG) faced a slowdown in consumption in urban markets and a decline in rural areas due to inflation in 2021. Data analysis firm Nielsen said in a report that these companies were forced to increase prices repeatedly due to inflation.
In the year 2021, the FMCG industry had to increase prices in double digits for three consecutive quarters to save its margins. Rural markets account for about 35 percent of the total sales of FMCG companies. It was hit hard after the second wave of the Corona pandemic and many FMCG companies including Hindustan Unilever reported negative growth in rural sales in their quarterly results.
The Nielsen report says that the increase in prices is affecting small producers. Because of this, there has been a 13 percent reduction in the number of small manufacturers with a turnover of less than Rs 100 crore. In the last two years, 8 lakh new FMCG stores were added and more than half of these are in rural areas. This speed of new store openings is more than double compared to pre-Covid years. With the opening of new stores in residential areas, the Metro-India retail store has expanded to meet the demands of consumers who have been working from home for almost two years. Rural markets bore the brunt of the price hike during the October-December quarter.
According to the report, both urban and rural markets witnessed a decline of (-) 4.8 percent in traditional trade, indicating a slowdown. The calendar year has seen double-digit growth, however, the decline in consumption impacted by the rise in prices will have to be monitored.
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