Rural India, small manufacturers lead FMCG growth in April-June; urban recovery gains momentum
Rural markets and small manufacturers led revival of packaged consumer goods in the April-June quarter, with India's villages outpacing growth in cities for the sixth consecutive quarter and growing twice as fast as cities, research firm NielsenIQ said in its quarter update on Wednesday.
'While urban recovery is gaining traction, particularly in smaller towns, rural demand remains the cornerstone of volume expansion,' Sharang Pant, head of FMCG customer success, NielsenIQ said. 'With inflation easing and a favourable monsoon forecast, the outlook for consumption remains optimistic,' he added.
Volumes (or number of units sold) of FMCG products in India's villages grew almost 2x faster than that of cities in the June quarter. Rural markets grew 8.4% year-on-year (y-o-y) in the quarter, compared to urban markets which grew 4.6%, the NielsenIQ data said. The gap between cities and villages, however, narrowed, with urban markets indicating signs of sequential recovery, growing 2.6% by volumes, aided particularly by India's small towns, the researcher said.Overall, value sales grew 13.9% in the April-June quarter, aided by sustained rural demand and steady urban recovery, while volumes grew 6% y-o-y, with consumers preferring smaller packs.
Makers of soap, tea, snacks and edible oils have noted in their June quarter earnings that favourable monsoons, income tax cuts and easing inflation are bringing about gradual recovery. India's largest consumer company, Hindustan Unilever, reported 4% volume growth for the April-June quarter, ahead of street expectations on both sales and profits. The maker of Dove soap and Brooke Bond tea attributed the growth to government incentives and a favourable monsoon forecast, pointing to a gradual earnings recovery. ITC, Godrej Consumer Products, Marico, Nestle and ITC too have indicated demand recovery in the coming quarters aided by a combination of marco factors.
NielsenIQ also noted that e-commerce channels continued to grow in the top eight metros. 'The resurgence is primarily driven by smaller towns, while metropolitan areas continue to experience a decline in consumption owing to channel shift,' the NIQ report noted.'Additionally, the rapid rise of small manufacturers outpacing overall industry growth highlights shifting market dynamics and intensifying competition,' Pant added.NielsenIQ, however, cautioned that sustaining this growth momentum would require deeper channel engagement and sharper, value-led propositions. 'The industry is entering a phase where agility and consumer-centric innovation will be critical to future success. Additionally, the rapid rise of small manufacturers outpacing overall industry growth highlights shifting market dynamics and intensifying competition,' Pant said.The sector also saw 7.4% increase in prices, with unit growth outpacing overall volume growth, indicating stronger consumer preference for smaller packs, NIQ said.Smaller manufacturers continued to drive FMCG consumption in Q2 2025, supported by steady volume growth across food and home and personal care categories on a lower base, backed by a combination of strong rural demand, and easing inflation which enabled small players to outperform overall industry growth.
Resurgence of smaller, regional and D2C brands have been giving stiff competition to legacy companies across noodles, biscuits, tea and cosmetics, on lower pricing, faster innovation and last-mile reach enabled by quick commerce and e-commerce. E-commerce platforms, which include quick commerce, continued their upward trajectory, gaining ground on modern trade (MT) in eight metros, NIQ said in the report, adding that even though e-commerce accounts for just 11–13% of FMCG value share in metros, it's already delivering more than half of the omnichannel growth. 'Despite the pullback of quick commerce dark stores, Q2'25 consumption in e-commerce surged—driven by higher shopper penetration and consistent spending, even among new shoppers,' it said. The home and personal care categories led with 7.5% consumption growth, outpacing food which grew 5.5.% in the quarter.
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