FMCG bounces back in August on the back of festival demand

At the onset of the festival season in India, the demand for fast-moving consumer goods (FMCG) in rural India has bounced back. After a negative sales value growth over the last few quarters, the FMCG witnessed a growth of 6.7 per cent in rural areas while the urban cities saw a growth of 5.5 per cent in August

According to data sourced by BusinessLine from Bizom, a retail intelligence platform that tracks consumer product sales from 7.5 million outlets, rural sales in July were down by 9.7 per cent whereas sales in urban areas were down 3.6 per cent. In June, the rural sales growth was -0.2 per cent and the urban sales value growth was -3.1 per cent.

Overall sales up

The overall FMCG sales in August was up by 6.3 per cent on a month-on-month basis whereas the overall growth in July was -7.9 per cent and in June it was -0.9 per cent.

Industry experts believe that the rise in rural spending is driven by festivities after consumers spent cautiously in the preceding months, "The headwinds of price inflation and the pandemic have both eased off and this can drive consumption beyond the 'Need' products to the 'Want' products. We've seen an uptick in discretionary spends too in August and this bodes well for the industry," said Akshay D'Souza, Chief of Growth & Insights, Bizom.

Companies are anticipating further rise in sales of FMCG products as demands have increased. "With consumers seeking convenience and value, we are ensuring that we meet specific needs that come with being on the move or for in- home celebrations. Be it on-the-go packs of Tropicana or large packs of brands like Pepsi, 7Up and Lay’s are some of the most popular across Tier 1, 2 and 3 markets during the festive season," said PepsiCo India spokesperson.

Experts believe that the growth in sales of the FMCG products after the festival season will only be determined by the agriculture output in the country.

"Presently, the Kharif crop is driving the income levels of the rural economy. Post the festive season, it will depend on how the rabi crop is performing to determine how the growth will sustain. It is early to decide on that," said D'Souza

Rural India distribution network

Companies have been working on ramping up their rural distribution network and their recalibration of the supply chain to boost last-mile connectivity with the consumers post the coronavirus pandemic.

"We continue to strengthen our distribution both through traditional and e-commerce channels to cater to demand across urban and rural geographies," added the PepsiCo India spokesperson.

"We are looking at a 20-25 per cent increase in consumption, especially in the discretionary spending category this festive season. It is exciting to notice the increase in spending on cosmetics and personal care categories. The demand for such products is fast rising in all segments and we are looking at entering this segment by the year-end. We are seeing a spike in consumption since the start of the festive season," said Ankur Dahiya, Co-founder & CEO, Rozana , a rural commerce start-up.

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