Demonetization has had a significant impact on the category as this is primarily driven by cash transactions. Since petty & small value consumption will be majorly impacted by the exercise, we believe that consumer non-durables category will bear the brunt

Consumer Non-Durables as a category is discretional in nature and is increasingly subjected to current consumer sentiment. Since the category largely constitutes FMCG categories, two years of consecutive drought has been a drag, with the rural economy ceasing to be a driver. Moreover, key heavyweight sub segments such as textiles, packaging and paper have been under a lot of stress recently, often contracting.

Demonetization has had a significant impact on the category as this is primarily driven by cash transactions. Since petty & small value consumption will be majorly impacted by the exercise, we believe that consumer non-durables category will bear the brunt

The non-durables category as a whole has been contracting since July 2015 and has averaged a growth of (-) 3.7% until July 2016. However, since August, a stability of sorts has returned and the category is now in positive trajectory. This year’s healthy monsoon and its anticipation has been the primary reason for the revival and we believe that this has influenced the strong rural consumer sentiment.

Several subcategories of non-durables have been recording a healthy price rise suggesting that there is significant consumer demand for discretionary products. Prices of personal care items (FMCG), a heavy weight subcategory among non-durables, have been increasing since February 2016 with inflation rate averaging 7.25% in Q2 this financial.

However, demonetization has had a significant impact on the category as this is primarily driven by cash transactions. Since petty & small value consumption will be majorly impacted by the exercise, we believe that consumer non-durables category will bear the brunt. Credit abeyance and buyer-seller relationships may not be underestimated at this time though.     

Principal factors influencing the category  

(Updated as on March 15, 2017)