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    COVID-19: Income decline forces consumers to buy smaller, cheaper products

    business | IST

    COVID-19: Income decline forces consumers to buy smaller, cheaper products

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    Consumers in urban markets have been buying in huge quantities but rural consumers are treading cautiously.

    The coronavirus pandemic and the resultant lockdown have thrown up a clear divide in spending patterns across India: consumers in urban markets have been buying in huge quantities but rural consumers are treading cautiously.
    "We find that urban is much better than rural. We need to wait for a couple of weeks before there is a rural uptake," said Ullas Kamath, MD, Jyothy Labs. He added that consumers were moving down to lower-priced SKUs (stock-keeping units). "Smaller packs are also moving faster."
    Other companies in the FMCG space like Nestle India, Dabur and Parle Products are also seeing similar trends.
    "The migrant issue and well as falling incomes in general will change the dynamics of the consumption pattern," said Krishna Mohan Nyayapati, Director, Emami Agrotech, who is confident that things will improve soon in the rural markets.
    Private labels and local origin brands are also seeing a lot of traction. Market research firm Nielsen believes that it is seeing a clear trend of consumers moving towards cheaper brands.
    "Overall, we find that small packs and medium packs are selling more in rural channels. In personal care, there are more small packs," said Prasun Basu, South Asia Zone President, Nielsen. "But in foods, we see more large packs selling."
    The cautious consumer sentiment is also a result of overall income decline in the mass market segment.
    "Findings of our analysis of consumer credit has been sobering. The mass-market segment has seen earnings decline by 50 percent. Consumers are hoarding cash and are having a severe distrust in the economy," said Abhishek Agarwal, Co-founder and CEO, CreditVidya.
    Over the last two months, the biggest issue for India's consumer goods industry has been transportation and logistics. However, FMCG companies are expecting most trucks to be back on the road by May end.
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