Rural demand recovery trends seen in March quarter are expected to continue in 2024. The latest report released by Kantar stated that the “brightstar” in this year is the resurgence of the rural market. Sales volume growth in rural markets (5.8 per cent) outpaced urban markets (4.7 per cent) in the March quarter for the first time in many months.

The report added that rural markets are expected to “maintain better growth levels” compared to urban for the rest of the year.

K Ramakrishnan, Managing Director – South Asia, Kantar Worldpanel told businessline, “Easing inflation levels are helping the rural recovery. Kharif harvests, while not spectacular, haven’t been disastrous as well, and that is also helping.

As a result we are seeing these offshoots of growth. A lot would depend on the Rabi harvests, and initial reports are suggesting that we may see slightly lower harvests compared to last year. Rural is not therefore completely out of the woods yet. We expect Q2 to be around the same levels as Q1, and a good monsoon could propel the Q3 and Q4 numbers.”

However, the report also flagged sluggishness in urban consumption in March and December quarters. “While Urban’s general consumption has increased significantly, its FMCG consumption hasn’t improved proportionally. FMCG has not captured the imagination of the average household, like other categories have.

Despite this, Urban performed well for the most part of 2023, but rapid growths are hard to sustain. Growths have slowed down across key categories, and we expect them to remain at these lower levels for one more quarter at least,” Ramakrishnan explained.

Overall FMCG industry volume growth in March quarter was pegged at 5.2 per cent year-on-year, which was sequentially flat compared to December quarter, as per Kantar’s estimates. “The humongous Q2 (June quarter) of 2023 will continue to keep the Q2 ‘24 growth in check, because of the base effect,, and it is likely that we may even see a slight dip in the next quarter.

While there is definite economic prosperity, we still maintain caution for FMCG,” Kantar’s FMCG Pulse Q2 report added.

Meanwhile, consumers spent 18 per cent more on groceries and other FMCG products in the March quarter of this year compared to the last two years ( vs June quarter, 2022). This indicates that despite softening in commodity prices of FMCG products have remained high.

A typical Indian household spent ₹49,418 in March quarter this year. Urban households on an average spent 1.6 times more than rural households (₹41,215), the report added.

“Inflation might have slowed down to acceptable levels, but its effects are not lost on the consumer. Groceries are the biggest household expense, accounting to over 24 per cent of all quarterly expenses in a household. The spends on the category increased by 19 per cent. This means since the last round (June quarter, 2022), the jump in household spending translates to ₹2,000 quarterly,” the Kantar report noted.

In terms of regions, Southern Indian consumers emerged as the highest spenders. They increased their spends by 35 per cent in the last two years (March quarter, 2024 vs June quarter, 2022), the report noted.