INDIA FMCG GROWTH SNAPSHOT - Nielsen · DISTRIBUTION GROWTH BY TOWN CLASS Q3 2018 VS Q3 2016 Banners Standalones 9.7 12.0 3.8 4.5 MT - No. of stores (’000) Q3 2016 Q3 2018 FMCG

We discussed in our last quarterly snapshot (released on 28th August) that after the void created in the trade

pipeline in the run up of Goods & Services tax (GST) roll out, the stock levels got filled up gradually Q4’17

onwards. Nielsen had projected that growth trends between FMCG manufacturers’ shipments and retail off-

take will come closer to each other in the July-Sep (JAS) quarter. The market has behaved exactly in that

fashion as the industry delivered another stupendous performance with 16.5% value growth in the quarter

ending Sep’18. This was led by uptrend in private consumption, expansion in rural (farm and non-farm)

income, and inflation levels being contained within 4%.

Nearly 80% of the value growth clocked by FMCG industry in the JAS quarter was volume driven (13.4%).

Rural markets continued to grow faster (20%) in the quarter; urban India also had a good run with 14.5%

value growth.

5

There are two big themes emerging in terms of sources of growth - one of them has been the fast sales

upsurge in modern trade (MT) channels in India and the other one has been the rise of the small “Goliaths”

essentially the small and regional players at the other end of the spectrum.

RISE OF MODERN TRADEIn our last note, we discussed that Modern Trade channel contribution to total FMCG sales has breached

10% mark! However, there is a huge room for growth if we compare MT contribution in other Asian markets.

Growth in Modern Trade sales (including brick and mortar retail banners, standalone MT outlets, and

eCommerce) has increased substantially during the last few years with multiple changes in trade and policy

environment.

INDIA FMCG GROWTH SNAPSHOTJULY – SEPTEMBER 2018

FMCG GROWTH TRENDS - All India U+R

11%

13%

20%

14%

10%12%

11%

16%

8%

5%

14%

6%

9%

5%

6%

5%

9%

3%

8%

2%

13%

3%

9%

2%

Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 Q1’18 Q2’18 Q3’18

Volume Growth

Value Growth

Price Led Growth

MODERN TRADE CONTRIBUTION

74%

Phillipines

70%

Malaysia65%

Thailand

55%

China

43%

Indonesia

10%

India

Copyright © 2018 The Nielsen Company (US), LLC. All Rights Reserved.

Demonetisation of Rs 500 and 1000 currency in Nov ’16 proved to be a big tailwind for MT channel – shoppers

(including first time) were driven to MT format stores with plastic money.

Post demonetisation, the second booster to the MT channel came in the form of GST. It is evident from the

chart above that the modern trade channels are getting stronger quarter on quarter.

A deep dive in MT channel sales helped us identify three key factors contributing to the growth of the

channel:

Store Universe Expansion: Modern Trade channels – both banners and standalone (SAMT) - has seen

significant universe expansion. In the last two years these formats have witnessed double-digit growth on

an annual compounded basis. Banners viz. Easyday, Apollo, Medplus, and D-Mart, led to universe

expansion; especially in lower town classes. On the other hand, a sharp rise in SAMT stores has been

observed in five lakh plus (FLP) towns.

MONTHLY VALUE GROWTH YA

Nov 16

6%

13

% 20

%

8%

16

%

13

%

14

%

11

%

14

%

13

%

Dec 16 Jan 17 Feb 17 Mar 17

Traditional Trade

Modern Trade

FMCG GROWTH TRENDS

MAT Sep 15

12

%

3%

7%

4%

14

%

14

%

11

%

22

%

MAT Sep 16

MAT Sep 17

MAT Sep 18

Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 Q1’18 Q2’18 Q3’18

11%12%

21%

13%

10%11%

9%

16%12%

15% 15%16%

19%20%

26%24%

Traditional Trade

Modern Trade


Same Store Growth (Throughput): MT banners are also focusing on same store growth and are

promoting the ‘Big Days/ Weeks’. The chart below depicts that the big days are getting bigger! Also, the MT

retailers (in association with FMCG manufacturers) are creating more such occasions (example - labour

day/week) to offer promotions and buzz around it-leading to increased footfall and expanded

shoppers’ basket.

18%

32%

33%

58%

Metro

5-10 Lakh Town

1-5 Lakh Town

< 1 Lakh Town

DISTRIBUTION GROWTH BY TOWN CLASS

Q3 2018 VS Q3 2016

Banners Standalones

9.7

12

.0

3.8

4.5

MT - No. of stores (’000)

Q3 2016

Q3 2018

FMCG manufacturers are seen to move from monthly plans for MT to weekly orientation. The chart above

reveals that salary weeks witness 15-20% higher sales compared to regular weeks in a given month. It is also

evident that having a tactical play around big days/ weeks, and by markets, is an essential ingredient for

success in the fast growing MT channel.

WEEKLY FMCG SALES TRENDS - MT BANNER

____________________________________________________________

Notes:

1. Regular Weeks : Non-Salary, Non-Big Day Weeks

2. Independence Day: Two weeks considered as Big day weeks as peak lasts 2 weeks. 100 subtracted from index to get accurate read.

____________________________________________________________

W3

91

6

W4

11

6

W4

31

6

W4

51

6

W4

71

6

W4

91

6

W5

11

6

W0

11

7

W0

31

7

W0

51

7

W0

71

7

W4

91

7

W0

11

7

W1

31

7

W1

51

7

W1

71

7

W1

91

7

W2

11

7

W2

31

7

W2

51

7

W2

71

7

W2

91

7

W3

11

7

W3

31

7

W3

51

7

W3

71

7

W3

91

7

W4

11

7

W4

31

7

W4

51

7

W4

71

7

W4

91

7

W5

11

7

W0

11

8

W0

31

8

W0

51

8

W0

71

8

W0

91

8

W2

41

8

W1

11

8

W1

31

8

W1

51

8

W1

71

8

W1

91

8

W2

11

8

W2

31

8

W2

51

8

W2

71

8

W2

91

8

W3

11

8

W3

31

8

W3

51

8

W3

71

8

Republic

Day (Jan)1200

1000

800

600

400

200

0

Va

lue

Sa

les

(Rs.

Crs

)

Diwali

Independence

Day (Aug)

Labour

Day (May)Republic

Day (Jan)

Independence

Day (Aug)

Diwali

1.3X 1.5X 1.9X 1.4X 1.8X 1.3X 2.3X

Salary Weeks


4% to 9%Diapers

2% to 3.6%Breakfast Cereals

1.4% to 3.2%Liquid Toilet Soaps

Bangalore 26.1%

Pune 18.4%

Bangalore 15.1%

Pune 9.1%

Bangalore 11.25%

Pune 6.6%

E commerce Upsurge*July 2016 to Sep 2018

E commerce: Nielsen incorporated Ecommerce (eCom) sales in the Retail Index starting July 2018. With

cooperation from top e-tailers estimated to contribute approximately 75% to total eCom FMCG sales in

India, Nielsen published data with historical trends including eCom sales of 28 product categories.

Ecom channel contribution to India FMCG sales now stands at just over 1% and has grown at over 101%

since last year, in specific product categories and markets the contribution is already touching double

digits of total category value sales.


CONTINUED GROWTH OF SMALL MANUFACTURERS AND RISING REGIONAL PLAYERSComing to our second theme of FMCG industry growth in India, we see a strong performance from small

manufacturer and regional manufacturer-latter having their play in only one or two regions out of the four in

the market. The growth of small manufacturers have accelerated significantly in the last two quarters.

As for regional players on Q3’18, FMCG sales have grown more than 20% in the last three quarters to increase

their contribution from 3% YA to 4% in JAS quarter of 2018.

The presence of regional players is predominantly in Packaged Food categories where they clocked a 31%

growth in MAT Sep’18 (vs YA). This was nearly 3X times growth witnessed among National players.

When we look deeper into the regional players performance within Food categories it is evident that growth is

coming from players becoming bigger, as we see shift of players from bottom 70% segment to Top 30%; thus

driving growth for regional manufacturers in the packaged food space.

LARGE VS. SMALL MANUFACTURER

19%

11%

22%

11%

31%

10%

38%

15%

Q4’17 Q4’17 Q2’18 Q3’18

Regional National

VALUE GROWTH VS YEAR AGO (YA)

#Mfg Contribution by value (MAT Sept’18) MAT Sept’18 Growth vs YA

Top 50

Next 50

Next 200

Tail-end 48K+

60%

8%

11%

21%

10.6%

10.4%

12.8%

18.5%

NATIONAL VS.

REGIONAL PLAYERS

MAT Sept’18 Growth vs YA

National

Regional

11.7%

27.7%


FMCG INDUSTRY TRENDS - A FUTURE PERSPECTIVELooking at the overall macro-economic headwinds and tailwinds, Nielsen forecasts the industry growth in Q4

to be 12-13%.

Headwinds for the Indian FMCG industry -

1) Exchange Rate / Crude Oil:

Indian rupee had a sharp depreciation on exchange in Q3’18. This led to petrol and diesel prices soaring to an

all-time high during this quarter. Such highs, if sustained for long, can have major repercussions for the

FMCG industry.

2) Rainfall:

India experienced a below average rainfall this year. Rains were 91% of the long-term average at the end of

the July-September monsoon season, compared with a forecast of 97%. Major farm-dependent states, such

as oilseed and pulses-growing central state of Madhya Pradesh and the northern, rice-growing state of Uttar

Pradesh received rainfall that was lower than the long-term average. The drop in rainfall could lift food prices

and stoke inflation, which may harden in coming months because of rising fuel prices.

3) Kerala Floods:

The devastating floods in August have taken the state aback. The floods adversely impacted certain sectors

and industries. Kerala comprises of 5% of the Indian population, but is a consumption-oriented state. Kerala

saw a huge decline in Traditional Trade sales, despite some compensation coming from surge in Modern

Trade channel sales during the August floods.

NUMBER OF REGIONAL MANUFACTURERS: FOOD CATEGORIES

68

12,568

78

12,558

80

12,556

97

12,539

105

12,531

Q3’17 Q4’17 Q1’18 Q2’18 Q3’18

All regional players Growth

(Quarter vs YA)21% 24% 35% 42%

Top 30%

Bottom 70%


4) Plastic Ban:

Some of the states have recently implemented a total ban/ partial ban on manufacturing, using, selling,

storing and transporting plastic in line with the guidelines issued by the Central Pollution Control Board of

India. Currently given the scope is limited this ban has largely impacted the Beverage Industry (especially with

immediate ban on mineral water pouches, single use PET with capacity less than 200 ml, etc). Such ban has

possibility of spreading to other states as well as the coverage in terms of items banned could increase. This

could pose a significant increase in input costs for FMCG manufacturers.

Tailwinds for the Indian FMCG industry -

1) GDP Boost:

Post a dip in AMJ quarter of 2017, Indian GDP has witnessed growth jumps over the last four consecutive

quarters. The AMJ quarter had an 8.2% growth in GDP which was significantly higher than same quarter of

2017 (5.6%), the latter was reeling under headwinds of GST roll out. Also, the AMJ quarter of 2018 had a half a

percent acceleration in GDP growth over the previous quarter.

2) Inflation in control:

FMCG trends tend to mirror inflation growth rates. Annual consumer inflation in India which touched an all

time low in June 2017 jumped to a +5% in Jan’18. This is now sub 4% level in Q3’18. Inflation is projected to be

at 4.6% in Q4‘18.

3) Rural Growth Impetus:

The Central Government has announced an increase in the minimum support price (MSP) of key Rabi and

Kharif crops. This coupled with the surge in services sector, is likely to provide a significant boost, to

recovering farm income. Also, the government focus on improving rural infrastructure continues, which in

turn would keep on boosting farm and non-farm activities in rural areas.

We maintain our growth estimate for FMCG industry for calendar year 2018 at approximately 13%.


For more information contact

Sameer Shukla | [email protected]

Executive Director, RMS South Asia

Nitya Bhalla | [email protected]

Data Science Leader, South Asia

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Documents

INDIA FMCG GROWTH SNAPSHOT - Nielsen · DISTRIBUTION GROWTH BY TOWN CLASS Q3 2018 VS Q3 2016 Banners Standalones 9.7 12.0 3.8 4.5 MT - No. of stores (’000) Q3 2016 Q3 2018 FMCG