As per a Care Ratings report, the FMCG sector is expected to continue to face headwinds due to economic slump and the sector is only to see recovery after Q3FY21, which roughly means six more months to go."With few definite signs of improvement in the economy in the myopic future, we do not expect much improvement in Indian FMCG sector until Q3FY21," a CARE Ratings report said on Wednesday.
While consumer goods and dairy products have seen a hit in demand, it is the personal care division that has seen the worst impact of a slowdown. And given the slow demand, the production has also seen a fall in this segment by a huge amount from Q2FY19 to Q2FY20.
Nonetheless, it is the government efforts which will decide the course for the segment as well as how the monsoon seasons pans out in the days to come. Also, much depends on how the government tables its budget which is rather challenging for the Finance Minister and how it manages to uplift the rural sentiment and spending from them through cuts in income tax and other benefits.
Also, better infrastructure is the need of the hour as the sector faces ample challenges when distribution their product line. "One of the largest FMCG companies considered to have the largest rural penetration has a reach to about 50,000 villages, while India has close to 7 lakh villages, showing how underpenetrated rural India is," the report said.
At the same time, players in the space will take measures such as offer discounts, provide small size samples of their product so that consumers can use newer products. Also, they would widen their footprint on the ecommerce platform that provide them phenomenal sales in comparison to kiranas and other offline channels.