Sales of fast-moving consumer goods (FMCG), cars, smartphones, and household appliances surged in the September quarter, both sequentially and year-on-year, according to company executives who spoke to ET.
The boost in sales can be attributed to lower inflation, an improved monsoon, falling prices, and offers provided by companies to pass on the benefits of lower input costs, thus uplifting consumer sentiment.
Passenger vehicle makers ended the September quarter with record sales, marking the best-ever quarter.
Chief executives believe that the strong consumption in the September quarter indicates a positive festive season ahead. The festive season plays a significant role in driving sales, accounting for 30-40% of sales in categories such as passenger vehicles, smartphones, televisions, and appliances.
The FMCG market saw a value growth of 8-12% compared to the previous year in the September quarter, driven by a revival in rural demand and price cuts in various categories. Rural sentiment has improved due to the revival of the monsoon in September, ending the year on a positive note, according to companies.
A recent report by Centrum, which hosted an FMCG dealer-distributor conference, stated that rural India is slowly and steadily recovering. The report noted an increase in demand for detergents and food categories, while beauty and personal care categories saw a marginal uptick in demand.
The report also mentioned that rural consumers still prefer purchasing smaller packs despite price cuts introduced by companies to tackle inflationary pressures.
The FMCG sales had declined in the second half of 2021 due to high inflation and the economic impact of Covid. However, recovery began in the March quarter and continued in the subsequent quarters.
In the auto industry, companies sold 1,070,377 units in the quarter, marking a 5% YoY growth and an 8% sequential growth. The increase in sales was mainly driven by the launch of new models and strong demand for sport-utility vehicles (SUVs).
While the consumption of high-value items like televisions and refrigerators witnessed growth in the last quarter, sales of mass segment and entry-level products are yet to recover.
Shashank Srivastava, Senior Executive Officer of Marketing and Sales at Maruti Suzuki, stated that the demand parameters are healthy, as reflected in the bookings and enquiries, indicating a positive festive season ahead.
Maruti Suzuki reported a 24% surge in retail sales during the Onam festival last month.
Tarun Pathak, Director of Research at Counterpoint, mentioned that smartphone sales grew by 2% in July and August, reversing the downward trend seen earlier this year. However, September numbers may decline due to the high base effect from last year’s early start to the festive season.
The purchase of electronics and appliances witnessed a 15% volume growth YoY in the quarter, driven by strong sales during Independence Day, Onam, and Ganesh Chaturthi.
Leading electronic retail chains like Reliance Retail and Vijay Sales recorded double-digit sales growth in August and September. However, sales of AC and refrigerators remained subdued due to weak summer in the North.
Kamal Nandi, Business Head of Godrej Appliances, highlighted that the mid-to-premium range is the key driver of growth in the industry.
Consumer inflation reached an eight-year high of 7.8% in April 2022. Although it eased in subsequent months, lower inflation since the March quarter has improved FMCG volumes, especially in rural markets.
Value vs volume
While there is sales improvement across various sectors, growth is primarily driven by value rather than volume, as stated by Krishnarao Buddha, Senior Category Head at Parle Products.
GfK India, an industry researcher, reported that value growth in electronics has outpaced volume growth till June. For example, offline retail sales of mobile phones grew by 12% in value in the first half of the year, but decreased by 4% in terms of volume.
Gautam Kamath, Vice President (Finance) at Procter and Gamble India, informed investors that while consumption trends are generally positive, cost pressures remain high.
He also highlighted that September rainfall is showing signs of improvement, which could impact the rest of the year.
However, rising crude oil prices are offsetting the benefits of lower input costs and increasing production costs for various sectors, including plastics, paints, FMCG, and tires.
Kamath added that commodity prices remain high, and the expected relief from cost pressures may vary depending on specific commodities.
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