FMCG industry has begun witnessing green shoots in rural demand recovery. Forecast of normal monsoons and softening of inflationary pressures bodes well for rural consumption uptick, industry players said.
In a recent earnings call, Mohit Malhotra, CEO, Dabur India, “ Rural growth is coming back. As per syndicated industry data, after almost three years, we are seeing rural growth ahead of urban growth. Going forward, normal monsoons, improving macros, continued government spending and lower inflation, should augur well for the FMCG industry.” For Dabur, March quarter was the second quarter, when rural demand grew ahead of urban. The FMCG major recorded 8 per cent growth in rural markets and 5 per cent in urban areas in Q4 FY24.
Rural markets had witnessed a sequential slowdown in the December quarter (compared to the September quarter for the sector, while urban volume growth ( 6.8 per cent) continued to outpace rural volume growth (5.8 per cent), according to NIQ data. Factors such as higher inflation levels and erratic monsoons impacted rural demand during FY24, while urban growth remained strong for the FMCG sector. FMCG players believe the tides are likely to turn with expectations of a gradual recovery in rural demand in the coming months.
‘Gradual recovery’
“We are seeing gradual recovery. We are hopeful of a better monsoon and monsoon does have an impact on the agri economy and therefore rural consumption. Most likely, the worst is past us and from here onwards we see a gradual recovery in rural consumption,” Rohit Jawa, CEO and MD , Hindustan Unilever said in an earnings call last month.
Speaking to businessline, Angshu Mallick, MD and CEO, Adani Wilmar said, “ Inflation rates are now cooling down. There are expectations of a good monsoon and good Kharif crop. I am confident that come July, we will see a very good revival of the rural market. “
“Earlier, rural markets’ contribution for us was at 31 per cent. In FY 24 the rural market share has grown to 32 per cent, up by 1 per cent. But going forward, I feel good monsoon, good Kharif crop and our rural distribution expansion, will increase the rural market’s share to our business further, “ Mallick added.