Rediff.com« Back to articlePrint this article

Rural FMCG growth overtakes urban after 5 quarters

May 08, 2024 20:58 IST

India’s fast-moving consumer goods (FMCG) sector witnessed growth in rural consumption in volume terms outpace urban consumption for the first time in five quarters, in the January-March period.

FMCG

Photograph: Niharika Kulkarni/Reuters

According to a report from consumer intelligence firm NIQ, rural consumption grew at a rate of 7.6 per cent year-on-year (Y-o-Y) in Q1CY24, overtaking that in urban areas which stood at 5.7 per cent.

This is a notable change from Q4CY23, when rural volume growth was at 5.8 per cent, and the urban consumption rate was higher at 6.9 per cent.

 

The FMCG industry as a whole experienced 6.6 per cent growth in value, primarily driven by a 6.5 per cent increase in volumes.

“The FMCG industry growth continues to be driven by consumption trends in Q1CY24, with rural areas surpassing urban growth for the first time in five quarters,” said Roosevelt D’Souza, head of customer success-India at NIQ.

Volume growth for Q1CY24 was higher than the same period last year, when it stood at 3.1 per cent.

Homegrown FMCG firm Dabur India was the first to report an uptick in rural consumption in the March quarter, stating that their rural business grew at 8.2 per cent, almost twice the rate of urban markets at 4.2 per cent.

While there is a consumption slowdown in urban markets and modern trade channels, rural markets and traditional trade registered an uptick, said NIQ.

Despite strong double-digit volume growth of 14.7 per cent in modern trade channels in Q1CY24, it saw a sequential decline from 16.9 per cent in Q4CY23.

In contrast, traditional trade experienced stable growth, with volumes registering 5.6 per cent growth in Q1CY24 compared to 5.3 per cent in the previous quarter, “suggesting that traditional retail channels are holding their ground,” the report stated.

The report further pointed out that non-food categories grew at 11.1 per cent in the quarter, two times faster than food categories, which grew 4.8 per cent in volumes.

“Notably, the home and personal care (HPC) 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,” D’Souza said.

Within the broader FMCG industry, large players continued to demonstrate stronger performance compared to small players, NIQ said.

However, smaller manufacturers have seen higher volume growth rates in non-food categories over the past two quarters compared to large companies.

“This might be because smaller players face challenges in keeping prices stable in the food sector, while non-food categories with significant price increases have experienced higher volume growth,” the report added.

Akshara Srivastava
Source: source image