The dip in demand for non-vegetarian food was led by channel and supply chain constraints and a lower purchase intent among shoppers, Nielsen said as it surveyed consumer demand for staples, packaged foods, and home care products across various trade formats such as supermarkets and kiranas. In modern trade stores, especially, Nielsen said demand for seafood dipped by over 60% due to supply chain issues, low shelf life and reduced footfall in phase 1 and phase 2 of the lockdown.
However, in the days prior to the lockdown, modern trade stores witnessed pantry loading of staples and convenience food items. Gradually, said Nielsen, as India moved in to the lockdown phase later March, shopper focus reduced on staples; while convenience categories, however, continued to grow.
India’s fast moving consumer goods saw sales dip by as much as 34% in the month of April compared to a year ago period, estimates by Nielsen suggest as the lockdown caused a disruption in supplies.
The slowdown was led by a sharp dip in sales across small neighborhood grocery stores or traditional trade formats that were forced to shut down in parts of the country or work amid restricted hours that Nielsen said caused a sharp deceleration in growth of the sector. Modern trade stores, however, continued to grow in the month of March and April benefitting from early pantry-loading in March.
Last month, Nielsen slashed its 2020 growth outlook for India’s fast moving consumer goods sector to 5-6% from its earlier projection of 9-10% due to the covid-19 crisis.
“After a three per cent decline in Mar ‘20 (versus Mar ‘19), FMCG industry clocked a 34% decline in April—traditional trade channels led this sharp drop, while modern trade continued to grow in April 2020,” Nielsen researchers said in their third update on impact of covid-19 on the fast moving consumer goods sector on Friday.
Nielsen said that in April, traditional trade channels—that account for 88% of FMCG sales in India—witnessed a sharp de-growth due to area or shop closures.
“On an average, a traditional retail shop was closed for 12 days in April due to various restrictions and constraint—this number was significantly higher for outlets other than Chemists (4 days) and Grocers (8 days).” Nielsen said, this led to a loss in business. Retailers also found it hard to procure a full range of goods amid restricted movement and production of supplies.
In fact, consumers pivoted to organized retail formats such as online commerce, and modern trade stores—this was especially true in the days prior to the lockdown as consumers rushed to large format grocery stores to load their monthly groceries.
Nielsen noted that in the days prior to the lockdown, average weekly value sales at modern trade stores jumped from ₹690 crore to ₹910 core indicating pantry-loading by shoppers. This subsequently cooled down across modern trade, e-commerce, and cash and carry formats that also saw sales dip due to operational restrictions and reduced staff.
“The FMCG Industry increased sales in the weeks prior to the lockdown announcement across organised retail and organised wholesale channels, this can be attributed to stockpiling. As we entered the lockdown phase, we saw a steep decline in sales across channels. This was caused by mobility restrictions and supply side challenges,” Nielsen’s research said.
India’s strict lockdown that began towards the end of March, also prompted several packaged consumer goods companies to temporarily suspend their operations; moreover, movement of goods from warehouses to retailers remained stuck as the lockdown placed curbs on movement of people.
This also prompted companies to pull back on consumer offers that led to a increase in average prices of key foods and beverage brands such as soft drinks, packaged ghee, flour, tea, cooking oils at modern trade stores in the months of March and April. “This was caused by retailer-led promotions slowing down, and change in brand and pack mixes,” Nielsen said.
However, now that the lockdown has eased, Nielsen expects kirana stores to make a come by as restrictions over opening hours ease out.
“As things become better—shops get permission to open for regular hours and supply chains ease, and with all learnings and technology coming in, it will make traditional trade a more more viable business model and a better experience,” Sameer Shukla, west market leader, South Asia, Nielsen Global Connect said.