October’22 began with the hope that the festival season would transform customer consumption, which had been under severe pressure since the beginning of May and only showed signs of transformation sometime in August, when the first wave of festivals began in India. This offered hope to FMCG companies that it could transform FMCG sales growth trajectory on the back of these festivities.
So when October’22 began, we were in the middle of Navratri and also the upcoming Diwali season. There was hope that this festival would turn around consumption for FMCG, which was under severe pressure due to price inflation that’s been affecting consumers for over a year now. This had affected the wallets of consumers and dug a deep hole in them. As a result, many consumers had begun down trading to save on expenses. However, with Diwali having come and gone now, we do see consumption taper off right after Diwali day. REVENGE FESTIVITIES it seems, lasted only until festival day.
The drop in sales post Diwali, could be due to two reasons.
The first, obviously, (and less concerning) is that there is severe over stocking at kiranas. This is showing up in urban sales this month. Sales have dried up post Diwali, leading to a flat month of sales.
The second reason is where the real worry begins. If this consumption drop is the result of high inflation, then we will see the next few months being challenging w.r.t. FMCG
To address this, going forward we do expect companies to focus on improving consumption.
Passing on price benefits to consumers, running operations more cost efficiently, and improving the value provided in each of its packs which had seen a lot of shrinkflation in the past, are just some of the measures we will expect to see going forward for fuelling consumption.