After the struggle of the last two years, this is the first time that rural demand for FMCG has outpaced urban markets.
Boost in Rural FMCG Demand
It appears that the rural India-led demand for FMCG products such as shampoos, soaps, detergent bars and other fast moving consumer goods during the March quarter helped in driving higher volume growth for the industry, as per a quarterly report by NielsenIQ released on Tuesday.
The FMCG industry recorded a volume growth of 6.5% during the March quarter (Q1) which is much higher than the 3.1% growth the industry has witnessed in the year-ago period.
In the meantime, the consumption growth for urban markets during the same period stood at 5.7%.
Interestingly, the rural markets grew at 7.6% on the back of robust demand for home and personal care (HPC) products, according to the analysts at NIQ.
This looks like a very positive shift after over a year of negative growth.
During the first quarter of 2023, rural consumption had recorded positive growth at 0.3%.
A Revival In Rural Consumption
The head of customer success (India) at NIQ, Roosevelt Dsouza said, “Home and personal care categories have outperformed food categories. While food categories witness higher unit purchases, the growth in HPC is largely driven by the popularity of larger pack sizes,” in a statement.
So far, the HPC segment contributes 32% to FMCG sales.
The industry which has been grappling with a slowdown in overall growth due to subdued rural demand now hoping for a revival in rural consumption.
Further, the breakdown of the broader consumption shows that demand for all FMCG categories is not growing at the same pace.
For instance, staples are almost witnessing muted growth.
Besides this, the sequential decline in urban consumption growth from 6.9% to 5.7% is due to a slowdown in volume growth for staples (items like oils, rice, atta and salt).
This has been the trend since the last four quarters and the staples has a 46% weightage in the food bucket.
According to the analysts at NIQ, “To some extent, the slowdown in staples can be attributed to high price growth in other than oil categories.”
It sports that the staples has also impacted the volume growth for the overall foods space – in Q1.
During this period, the volume growth for foods space stood at 4.8%, down from 5.3% quarter-on-quarter.
The non-food segment also performed well as the consumption touched 11.1% in Q1 compared to 9.6% in Q4 2023.
Further NIQ said, “This improvement can be attributed to an increase in rural uptick… in Q1, non-food sees almost double the growth (total) as compared to food.”
In the meantime, the value growth for the FMCG sector stood at 6.6% during Q1.
Despite HUL posting a decline in net profits due to price cuts during the Q4 FY24 it indicated that rural markets were showing green shoots of recovery.
