MUMBAI: Given the good monsoon this year and a boost in rural incomes, the current slowdown in the fast-moving consumer goods (FMCG) market could reverse in the second half of current fiscal 2020, says a report by BNP Paribas .
Apart from the strong monsoon, the report said rising PM-Kisan enrolments could boost rural incomes in the second half of fiscal year 2020. Channel liquidity concerns, too, are being addressed by the government, which could lead to an uptick in spends.
Dabur India CFO Lalit Malik said the company is hopeful of seeing green shoots of revival in the coming quarters on the benefits of a likely fiscal stimulus reaching rural consumers. “We are facing headwinds in the short term with the overall demand slowdown, coupled with the agrarian crisis, increased unemployment and liquidity crunch with dealers,” said Malik. Impacted by the slowdown, some of the FMCG companies witnessed a trend of dwindling volume growth over the last three quarters (see graphic).
In the hope of a revival, Dabur is investing in improving its rural footprint ahead of the curve. It has embarked on a major expansion programme to increase its rural coverage from 44,000 villages in March 2019 to 48,000 in the first quarter of 2019-20. “We would be increasing this to nearly 55,000 villages by March 2020. We are also expanding our rural product basket by way of newer lowunit price packs (LUPs) to feed these markets and push demand growth,” said Malik.
An ITC spokesperson said India is a growth market and there is enormous headroom for consumption to expand, especially in categories that have lower levels of penetration. “We are optimistic that the growth trajectory will pick up over time with the slew of measures announced by the government,” said the spokesperson.