FMCG growth lags even as rural plays catch-up

Feb 6, 2024

Mumbai: FMCG consumption was helped by improvement in demand in rural markets, with the industry reporting 6.4% growth in sales volumes in the December quarter. That translates into volume growth of 6.1% compared with the year-ago period, consumer intelligence company NielsenIQ said in its quarterly estimates published Tuesday.
With a growing preference for larger packs in rural markets, consumers are narrowing the gap with their urban counterparts, which bodes well for a sector that derives a significant portion of its growth from rural areas. However, sequentially, consumption growth in FMCG has slowed and the decline is more pronounced in urban markets, the analytics firm said.
This year's projections also don't look very good. NIQ The industry is estimated to grow between 4.5-6.5% by value in 2024, compared to a growth of 9.3% seen in 2023. “This approach reflects the industry's ability to deal with the complexities and adapt to changing market dynamics… Smaller manufacturers are recording higher sales than their larger counterparts for non-food categories,” NIQ analysts said. volume growth rate, while food categories show the opposite trend.” The industry witnessed a value growth of 6% during Q3FY24.
During the quarter, volume growth in rural markets slowed to 5.8% from 6.4% in the previous quarter. The slowdown in consumption growth was broader in urban areas, with volume growth slowing to 6.8% from 10.2% in the September quarter. Total volume growth in Q2FY24 stood at 8.6%.
“Despite sequential-quarter declines, the rural recovery narrative continued to evolve throughout the year. In Q4 2023, we see consumption growth, driven primarily by food and essential household products across habit-forming categories (such as biscuits and Noodles). …A favorable interim Budget supporting multiple 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 BizomThe top 75 cities with a population of five lakh and above contribute about 40% of the FMCG industry's revenue, while the rest – which it counts as rural India – contributes the remaining 60%. Low monsoon rains in key agricultural states have hit rural incomes, reducing demand. FMCG officials said growth in rural incomes and winter crop yields will be important in shaping the growth path of the industry.
He said the slowdown in urban consumption could be due to a subdued festive season, which failed to boost meaningful consumption of discretionary products, and the late onset of winter, which impacted spending in the personal care category. Akshay D'Souza, Head of Growth and Insights at Bizom. NIQ said the non-food sector witnessed slower consumption growth in urban areas in Q3FY24.

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