FMCGs hit harder in urban areas

Source: The Hindu Business Line, Jan 22, 2017

Mumbai: The impact of demonetisation on sales of FMCG categories in urban markets has been more athan double as comapred to rural markets. The dip in volume of sales in the overall urban FMCG category was at 24.37 per cent, compared to the overall rural FMCG category, where the drop was at 7.47 per cent between the pre- and post-demonetisation months of October and December, according to data from Brickworks Media (a concern of Chrome DM), a research and data analytics company.

In the urban markets, it was a non-seasonal category like noodles, which felt a greater impact where sales dropped to 33.23 per cent – while tea remained the least impacted at 10.77 per cent.

But it was soft drinks which had a double whammy at a 36.8-per-cent drop in sales, as it was a seasonal category when consumption was low in the winter months and the added impact of demonetisation led to an even further fall in volumes.

Low-ticket size categories like biscuits and candies also faced a double-digit drop in sales at 24.77 per cent and 24.13 per cent respectively. Non-food categories like detergents dropped at 16.46 per cent, and discretionary categories like personal care products were down by 27.93 per cent. Toothpaste and soaps were also down in urban markets by 16.17 per cent and 18.5 per cent respectively.

In rural markets, it was the soft drinks category that faced the maximum drop in sales at 13.8 per cent, followed by the chips and snacks category at 10.9 per cent.

Noodles also dropped 7.41 per cent, while tea sales were lower by 6.86 per cent. Low-value food categories like biscuits and candies suffered a drop at 5.13 per cent and 4.13 per cent, respectively.

The volume of sales of non-food categories like detergents also dropped 9.46 per cent while toothpaste (9.17 per cent), soaps (8.79) and personal care products(6.93) also declined in the rural markets between October and December. According to Pankaj Krishna, Founder and CEO, Brickworks Media: “The products of daily usage in the food category has seen a lower impact in the rural markets due to continued purchase on credit. Distributors and stockists have also been buying products on credit, which has helped the movement of FMCG products across the supply chain.’’

Consumer durables
In the case of consumer durables and mobile phones, the drop in sales has been sharper. For instance, in the home appliances category, demonetisation led to a 43 per cent drop in sales in the rural markets compared to a 54 per cent decline in the urban markets.

Explaining the trend in consumer durables, Krishna added: “Higher categories like consumer durables and mobile phones have been adversely impacted in rural markets, where all transactions happen in cash. In such categories, urban areas have seen comparatively lower impact as there have been cash-backs, credit card discounts, online offers and back-date billings.


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