FMCG players monitoring Covid impact on rural demand

Meenakshi Verma Ambwani New Delhi | Updated on May 10, 2021

Cos hopeful of good monsoon amidst subdued consumer sentiment

With the second wave of the pandemic spreading ferociously beyond bigger cities, the domestic FMCG industry is closely monitoring the impact on demand trends in rural regions and smaller cities.

Industry observers said that a broader spread is expected to have some impact on demand trends for non-food categories and those driven by discretionary spends and out-of-home channels in rural regions.

In addition, with States imposing lockdown-restrictions, essential stores are also now operating for limited number of hours in several regions during the second pandemic wave. As rural regions were largely untouched in the first wave, rural demand outpaced urban demand and rural FMCG sales had been growing in double digits.

Sunil Kataria, CEO - India & SAARC, Godrej Consumer Products, told BusinessLine, “Rural demand has held well throughout Q4 and the first two weeks of April were also robust. However, Covid-19 has some spread in the rural districts this time and this along with restrictions on movement, has started impacting rural momentum a little. It’s too early to comment if this is demand-led or lockdown restrictions- led.”

“The limited opening hours of grocery stores has adversely impacted the number of stores we cover and the overall assortment we sell. The intensity of this will be further clear in May given that strict lockdowns have been implemented across all states now,” he added.

Saugata Gupta, MD & CEO, Marico Ltd, said that the second wave has impacted “next set of urban towns”. “Unless there is a significant extended wave hitting the rural areas or a bad monsoon, we don’t expect any substantial long term demand drop in the rural areas for essential grocery items. However we need to continue to drive value to the consumer and protect against any potential down trading,” Gupta said.

“Considering the current circumstances and the localised lockdowns across most of the country there could be some impact in this quarter. We are hopeful that because of our strong distribution and supply chain agility we should be able to pick up the run rate in Q2. We are closely monitoring the situation,” he added.

FMCG companies have been significantly investing in ramping up distribution in rural regions over the past few years and are hopeful that a good monsoon will support strong rural demand in the coming months.

With subdued consumer sentiment, Abneesh Roy, Executive Vice-President, Edelweiss Securities, said that discretionary spends and out-of-home sales will be impacted even in rural regions during the second wave unlike the first pandemic wave. “With a forecast of good monsoon, rural demand may not see a serious challenge but we will need to watch how the situation evolves in the coming days,” he added.

Mayank Shah, Senior Category Head, Parle Products said that there has not been a dip in demand for packaged food categories in rural regions. “While there would be some impact due to restrictions on operational hours for essential stores, we are seeing that the average order value has gone up, even as consumers cutback on the number of trips,” he added.

Published on May 10, 2021

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