Even small pack sales decline as FMCG sector reels under slowdown

Historical drivers of growth in the fast-moving consumer goods (FMCG) industry seem to be showing a decline. Small packs, which make up 25-30 percent of overall sales for FMCG companies, have seen a decline in volume growth on a year on year basis.

Data sourced from market research firm Nielsen shows that three out of the top five high contributing categories for small packs have seen a decline in overall volume growth. Small pack categories for segments like biscuits, soaps and potato chips have seen a decline in volume growth in the January to July 2019 period (year on year).

For instance, the biscuits category saw a volume growth of 5 percent in the January to July 2019 period versus 7 percent in the same period last year. Small packs in the biscuits category contribute 70 percent of overall volumes for the category.

Recently, Varun Berry, managing director of Britannia Industries Ltd, Parle's main competitor, said that consumers are thinking twice before buying a five rupee packs. "Obviously, there is some serious issue in the economy," Berry had said on a conference call with analysts.

Similarly, the potato chips small pack category saw a volume growth of 15 percent in the January to July 2019 period against the 18 percent volume growth in the same period last year. Small packs in the potato chips category contribute 78 percent of overall volumes for the category.

Soaps too saw a volume growth decline on a year on year basis. Small packs in the toilet soaps space saw a volume growth of 0.1 percent in the January to July 2019 period against the 3.3 percent volume growth in the same period last year, according to data sourced from Nielsen.

Analysts say the decline in these categories could be because consumers are moving to larger packs that offer price benefits or moving to premium packs in some cases.

Chocolates, which is an impulse buy category, saw a volume growth of 12 percent in the January to July 2019 period against a 9.8 percent volume growth in the same period last year.

It will be critical to see how and when volume growth picks up in several of these categories in the small packs space.