MUMBAI: Demand recovery in rural markets aided FMCG consumption, with the industry recording a 6.4% increase in sales volume in the Dec quarter. This translates into a 6.1% higher volume growth over the year-ago period, consumer intelligence company NielsenIQ said in its quarterly estimate published on Tuesday.
With a growing preference for larger packs in rural markets, consumers are closing gaps with their urban counterparts, boding well for a sector that derives a significant proportion of its growth from rural regions.However, sequentially, consumption growth in FMCG has slowed down with the decline being more pronounced in urban markets, the analytics firm said.
This year’s projections do not seem very bright either. NIQ estimates the industry to grow between 4.5-6.5% by value in 2024, as compared to the 9.3% growth it saw in 2023. “This outlook reflects the industry’s ability to navigate complexities and adapt to evolving market dynamics… smaller manufacturers are recording higher volume growth rates for non-food categories compared to their larger counterparts whereas food categories exhibit a reverse trend,” analysts at NIQ said. The industry saw a 6% growth in value during Q3 FY24.
During the quarter, volume growth for rural markets declined to 5.8% from 6.4% in the preceding quarter. The pace of slowdown in consumption growth was wider in urban regions, with volume growth declining to 6.8% from 10.2% in the Sept quarter. Total volume growth was 8.6% in Q2 FY24.
“Despite a sequential-quarter decline, the rural recovery narrative continued to evolve throughout the year. In Q4 2023, we observe an uptick in consumption, primarily driven by habit-forming categories (such as biscuits and noodles) in food and essential home products… the favourable interim Budget supporting several economic boosters for the rural sector should augur well for companies with a rural strategy,” said Roosevelt D’souza, head of customer success (India) at NIQ.
According to retail intelligence platform Bizom, top 75 cities with a population of five lakh and above contribute about 40% to the FMCG industry’s revenues, while the rest – which it counts as rural India – accounts for the remaining 60%. Deficient monsoon rains in key agricultural states had impacted rural incomes, dampening demand. Rural income growth and winter crop yields will be key in of shaping the growth trajectory of the industry going ahead, FMCG executives said.
A subdued festive season, which failed to spur meaningful consumption of discretionary products, and the delayed onset of winter, which impacted spending in the personal care category, may have led to tepid urban consumption, said Akshay D’souza, chief of growth and insights at Bizom. NIQ said that the non-food sector has witnessed a slower consumption growth in urban areas in Q3 FY24.

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