In data-dark times companies struggling with consumer spend

FMCG firms report a consumption slowdown in urban India, driven by food inflation and changing spending habits, highlighting a need for updated consumption data.

The July-September quarter earnings of fast-moving consumer goods (FMCG) companies like Hindustan Unilever Ltd, Nestle, Britannia and Tata Consumer, flagged a consumption slowdown especially in urban markets. These companies that sell daily essentials like staples, cereals, chips, biscuits, soaps, shampoos and detergents, attributed the moderating growth in India’s cities to rising food inflation and lower wage growth among other things.

In data-dark times companies struggling with consumer spend

For decades, the performance of the FMCG sector has been considered the bellwether for broader consumer sentiment and trends in India. However, experts are now batting for looking afresh at capturing consumption trends. Referring to the FMCG slowdown, Zydus Wellness CEO Tarun Arora said in a recent interview to financial daily ‘Businessline’ that urban consumption is under pressure as consumers are making alternative spending choices and there is a shift in purchase behaviour.

Shiv Shivakumar, management thinker and former chairman & CEO of PepsiCo, has been underlining the need to look beyond FMCG spends to measure India’s consumption. “Among consumption drivers one must consider bank loans which are a good surrogate of confidence in the economy. Besides financial services, expenditure on telephony (the total GB consumed per individual in a family, the number of digital products), expenditure on entertainment, airline services, holidays and health services should be included,” Shivakumar said, stressing the need for fresh thinking on mapping consumption.

It’s no longer just about FMCG which may be under 5% of total consumption basket, Shivakumar added. While FMCG cannot be the sole indicator of consumption, Ipsos India CEO Amit Adarkar rued the lack of data on India’s revised consumption basket. “Two things are happening: the basket is changing, and staples probably have more weightage in the inflation calculation,” Adarkar said. This reflects the stress in the mass urban markets, specifically in FMCG where staples are struggling though premium products are doing well, he said. “Spends are happening on experiential categories like travel. Hotel occupancies are high. Up until recently, real estate and automotive segments were doing well,” he said.

While the traditional ways of spending money may be a bit under pressure, people are going for premium experiences. “A lot of money is also going into investments like mutual funds. If I’m locking a Systematic Investment Plan (SIP), it is from my consumption basket,” Adarkar said, underlining the need for a new lens on consumption trends.

However, absence of reliable data is a damper.

Though the government Census is a goldmine of consumer data on spending by people, it hasn’t taken place since 2011, Adarkar said. Scheduled for 2021, it got pushed owing to the covid pandemic and, curiously, it is still pending. “Besides, now such studies cannot be done every 10 years. Rapid consumption shifts render the data obsolete quickly,” he added.

The Government’s National Sample Survey Office (NSSO) also collects data on household expenditure, though some feel it is based on a smaller sample size, is conducted every four to five years and takes time to publish.

Consumption studies done by the economic policy think tank, the National Council for Applied Economic Research (NCAER) have also been missing, Adarkar said and the Indian Readership Survey (IRS) hasn’t been published since 2019. IRS, too, is a rich source of information on media consumption habits and penetration of brands and categories across markets with a massive sample size of over 3 lakh households.

Consumption shifts have accelerated in the last five years, especially, post-covid. The ascent of digitization, the massive jump in internet users, the rise of fin-tech, the growth in the start-up ecosystem, the rising aspirations and swings in purchase behaviour have been remarkable. “However, there is no data that gives a true nation-wide representation of these trends. In that sense, we’re in a data dark scenario,” Adarkar said.

In the absence of such data, research firms conduct individual studies for clients which are customised, proprietary and limited. “What we need is a broad India-level sketch of consumption which is a bit of a missing piece,” he said.

What stops research firms from conducting large surveys to capture consumption trends? The answer is the steep cost of such an exercise. No single private entity can take the load of an all-India consumption study with a significant sample size, Adarkar said. For this, the industry has to come together and share the cost burden.

Or the government can step in.