Rural demand for FMCG grows at a slower pace in January-March: NielsenIQ

Business Standard

08-05-2025

Rural demand drives 11 per cent FMCG growth in Q1 2025 despite slowing pace as consumers favour smaller packs and E-commerce gains traction in urban metros
Sharleen Dsouza Mumbai
Rural demand for fast-moving consumer goods (FMCG) started to grow at a slower pace in the January–March quarter but still remained four times faster than growth in demand in urban areas, according to NielsenIQ (formerly known as Nielsen).
Demand from rural areas stood at 8.4 per cent in Q1 of 2025 (calendar year), which was lower than 9.2 per cent in October–December of 2024. Urban demand, on the other hand, saw its growth further moderate in the quarter to 2.6 per cent, compared to 4.2 per cent in the October–December quarter.
'A higher unit growth than volume growth indicates a preference shift towards smaller packs in consumers,' NielsenIQ said.
FMCG majors have also continued to highlight the slowdown in urban demand for FMCG items. In a recent interview with Business Standard, Sudhir Sitapati, managing director and chief executive officer, said that he hopes urban demand will recover in the next 12 to 18 months. Companies have also observed consumers opting for smaller packs more than larger ones.
"The FMCG sector is showing mixed signals—while volume growth is slowing across categories, non-food segments are still outpacing food. Inflation is easing overall, but high edible oil prices are keeping staples expensive,' said Roosevelt Dsouza, head of customer success – FMCG, NielsenIQ India.
He added, 'Rural markets continue to drive growth, whereas urban metros continue to see a shift toward E-commerce with higher shopper engagement. With a favourable monsoon forecast and revised tax slabs, consumption is likely to pick up in the upcoming quarters. Interestingly, small players are gaining more ground due to a low base and changing market dynamics, though their long-term momentum remains to be seen."
In the quarter, traditional trade, which typically refers to sales from mom-and-pop stores, increased to 6.2 per cent from 5.0 per cent in the corresponding quarter last year. Modern trade saw a decline of 3.3 per cent in the quarter, compared to a decline of 1.1 per cent in the October–December quarter.
Food consumption growth slowed to 4.9 per cent in the quarter ended March from 6 per cent in the quarter ended December, due to decreased volumes in staple categories like edible oils and palm oil, which saw price increases.
Home and personal care categories saw a consumption growth of 5.7 per cent in the quarter, as demand from rural areas was higher.
'E-commerce continues to strengthen its presence significantly in eight metros, impacting the share of offline channels—both modern trade and traditional trade. This growth is largely volume-driven, supported by increasing online shopper penetration, more purchase occasions, and increasing basket sizes (more units purchased per shopper),' the report noted.