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Spending cut: Indian consumers opting for lower-priced goods

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Consumers are increasingly down-trading to lower priced or value products across FMCG electronics and apparel segments, signalling a possible squeeze on monthly household budgets as compared to a year ago.

In rural areas, the share of bulk or high value packs fell 22% among packaged foods while low value packs accounted for 10% more during April-June quarter compared to a year ago, according to a study by sales automation firm Bizom. Among personal and home care products too, the contribution of large packs fell 2.7% while the share of lower-priced products rose by 1-4%. Even in urban India, large packs’ share fell across categories, except in personal care, while small and medium sized packs grew.

“We saw consumers, especially in rural markets, increasingly buying lower priced packs—especially below `10— as it doesn’t really squeeze the wallet. Also, sales of large bulk packs were affected due to restricted operations by modern trade and online channels,” said Krishnarao Buddha, senior category head at leading biscuits maker Parle Products.

Overall FMCG sales expanded 8% during the April-June period over the same period a year ago, reflecting increased buying frequency and a recovery after a dismal quarter last year, which was severely impacted by the nation-wide lockdown.

“The down-trading could be mainly due to consumers looking to rationalise spending in anticipation of health emergencies due to the pandemic,” said Akshay D’Souza, chief marketing officer at Mobisy Technologies, which owns Bizom.

Spending-Cut

For categories that saw price hikes in the recent past, there was even down-trading to unbranded products.

Angshu Mallick, chief executive of Adani Wilmar, said there is a 10-15% shift from its Fortune brand to lower priced ones, primarily in rural markets, due to record increase in edible oil prices as well as stressed consumer budgets. “The down-trading in purchase has further intensified in the last two months after the peak of the second wave, probably due to increased economic constraints,” Mallick said.

Consumers have also opted for buying smaller packs in categories such as edible oils, sugar and tea in the hope that their prices will come down soon.


DISCRETIONARY SEGMENTS


In smartphones, the sub- Rs 10,000 segment could account for 54% of overall sales this calendar year, up from 51% in 2020, said market research firm IDC, adding that under normal circumstances, the contribution should have been only 40% in 2021. Contribution of this segment to overall sales remained flat last year after rapid decline between 2016 and 2019.

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