Cut from cookies to fast food, urban consumption at two-year low; Impact on middle class pockets

New Delhi| People are also having to make huge cuts in the expenditure on cookies and fast food. Slow urban spending over the past three to four months has not only impacted the earnings of the largest consumer goods companies, but has also raised questions about the structural nature of India’s long-term economic success. India’s economic growth since Corona has been largely driven by urban consumption. Now this seems to be changing. Nestle India Chairman Suresh Narayanan says that most of our consumption was in middle class families. But this class is now cutting down on spending. Nestle’s revenue has declined for the first time since the June quarter of 2020 in Corona. According to an index by Citibank, there is a sharp decline in Indian urban consumption. However, some of the decline may be temporary, said Samiran Chakraborty, chief India economist at Citi. Talking about listed Indian firms, the increase in inflation adjusted wage costs for urban Indians has been below two per cent for all three quarters of this year. This is well below the 10-year average of 4.4%.

Fast food chains like McDonald’s, Burger King, Pizza Hut and KFC have recorded a decline in store sales. People are still coming. They are choosing cheap food. Burger King’s Asia CEO Rajeev Varman said their sales fell three percent in the quarter.

Inflation has averaged 5 per cent over the past 12 months. Food inflation remains above 8% as prices of vegetables, grains and other essential foods rise due to weather shocks. Retail inflation hit a 14-month high of 6.2% in October.

Retail sales grew by close to 15% year-on-year during the festive season that ran from August to November, Nomura data showed. This is almost half of what it was last year. Rajwanti Dahiya, 60, said, We haven’t spent at all during this festival season. Dahiya survives on her husband’s monthly pension of Rs 30,000. She says savings are less. Life is going very hard.

The effect of decline in earnings of FMCG companies is visible on the stock market. The Nifty FMCG index has fallen by 13 per cent in the last 45 days, while the benchmark Nifty 50 has fallen by only 7.4%. Only one of the 15 companies in the FMCG index has seen sales rise in the September quarter.

Consumers in big cities are now shying away from purchasing branded goods. They’re looking for cheaper unbranded alternatives, from hair oil to tea. Due to this, Hindustan Unilever’s food and refreshment sales have fallen for the first time in 11 quarters. Rohit Jawa, Chief Executive Officer, Hindustan Unilever, said, we are seeing growth slowing down in big cities.