FMCG Sales Rally Amid Higher Spending In Rural India

India's packaged consumer goods grew 9% by value and 8.6% by volume in the September quarter from the year earlier, aided by higher spending in rural India for both essentials and discretionary products, researcher NielsenIQ said. It attributed the growth to cooling inflation, a decline in unemployment and lower LPG prices. Economists said it needed to be seen if the trend would persist beyond festive season and that much will depend on agricultural output, according to a report published in Economic Times.

"With kharif output to be sub-optimal, I believe revival cannot be taken for granted," said Madan Sabnavis, chief economist, Bank of Baroda.

This comes after four quarters of subdued growth in rural markets, which had declined 2-5% as consumers had been either downtrading (buying lower-priced products) or not purchasing as many goods, impacted by soaring food and fuel prices, added the Economic Times report.

Easing commodity prices

Roosevelt D'Souza, lead, customer success, at NielsenIQ, said the "renewed optimism" augurs well for the current festive quarter both in urban and rural markets. "We see recovery in habit-forming categories such as biscuits, tea, noodles and coffee after five quarters," D'Souza said. He said the increase in consumer spending on discretionary categories such as personal care and home care products suggests that rural consumers are beginning to spend beyond essential categories, reported Economic Times.

"We are increasingly optimistic of the future as we are seeing green shoots of recovery in rural sentiments; the gap between rural and urban growth has declined," said Mohit Malhotra, chief executive of Dabur, for which 48% annual sales come from the hinterland. The maker of Real juice and Vatika shampoo said it is investing on distribution infrastructure and brands to deliver volume-led profitable growth, and take up its rural coverage to 110,000 villages from 100,000 last year.

Over the past six quarters, the FMCG sector had seen high price-led growth, with volumes under pressure amid soaring inflation. However, easing commodity prices have led to a reversal now.

India's villages, crucial for the health of the overall fast-moving consumer goods (FMCG) sector, contribute over a third of its sales. Sequentially, rural markets grew 6.4% by volume, up from 4% in the preceding June quarter. Noting improved consumption trends across the country, NielsenIQ said urban India continued to grow by volume and value as rural markets show signs of recovery. Economists said persistence of the trend would be key, stated the Economic Times report.

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