Urban markets continued to drive the FMCG industry’s consumption story in the March quarter while overall volume growth of the sector remained under pressure. Analysts believe volume growth is expected to see improvement in the coming months on the back of an uptick in consumption due to election season besides projections of normal monsoons. Meanwhile, the QSR segment continued to see a challenging demand environment in Q4FY24,as per analysts.

In its quarterly preview report for Q4 FY24 on the consumer sector, Nuvama Institutional Equities noted that the “volume growth will remain challenging with low-to-mid-single digit growth” driven by urban markets. It added that factors such as likely good monsoons, upcoming general elections and real rural wages moving on a positive trajectory, may boost consumer demand from Q2 FY 25 onwards.

Optimistic outlook

According to a report released by Motilal Oswal Financial Service on the consumer sector on Monday, “Urban markets continued to see improvement and rural markets have also started witnessing recovery. FY24 was an interim phase when price cuts and consumer offers impacted revenue growth, while volume recovery lagged. We believe volume growth has bottomed out and anticipate a steady improvement over FY25-FY26.”

Krishnarao Buddha, Senior Category Head-Marketing, Parle Products told businessline, “ In the December-March period, we have definitely seen some improvement in rural demand trends, with the gap between rural and urban growth rates narrowing down. But overall volume growth for the sector has been subdued. With a large number of congregations across the country due to the elections, we are seeing a rise in demand for categories such as snacks and beverages. The El Nino impact is expected to fade by May and there are projections of normal monsoons. So the April-June quarter will be a positive one for the FMCG sector.”

Companies such as Dabur noted in a BSE filing that while demand trends remained sluggish, it saw rural growth picking up and the gap between rural and urban growth rates narrowing.

In its quarterly preview report released earlier this month, Elara Capital pointed out that the demand environment for Quick-Service Restaurants (QSR) sector continued to be muted and players are expected to report a decline in same-store-sales in varying degrees.