Rural Growth, Small Packs & Resilience, Keep FMCG Firms Afloat
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For the fifth consecutive quarter, rural growth outpaced urban areas, according to market research firm NielsenIQ. However, the rural demand in consumer goods fell in the March quarter compared with the October December quarter in 2024. Demand for fast-moving consumer goods (FMCG) in rural India stood at 8.4 per cent in the March quarter, compared to 9.2 per cent in October-December of 2024. Urban growth was at 2.6 per cent, compared to 4.2 per cent in the October-December quarter. Although rural demand for consumer goods slowed down, it was still four times faster than in urban areas.
"FMCG market witnessed subdued demand trends in the financial year 24-25. Rural demand continued to improve gradually while urban demand moderated over the year," said Rohit Jawa, CEO, HUL.
In the Q4 results, Varun Berry, vice chairman & MD, Britannia, said, "Our distribution footprint now directly caters to about 29 lakh outlets across the country, with the rural distributors aiding towards strengthening our presence in the rural markets."
Marico too in its Q4 results shared a similar sentiment, "Government schemes, rise in MSPs and healthy monsoon forecasts to aid ongoing rural recovery," said the company.
With rural and non-food categories leading the charge in consumption growth, and both traditional and modern trade channels playing crucial roles, the market is on an exciting upward trajectory. With a favourable monsoon forecast and revised tax slabs, consumption is likely to improve in the upcoming quarters. "We expect consumer demand in India to recover progressively in the coming quarters, both in urban and rural markets. Our business fundamentals remain strong with household penetration gains across Oral Care, Hair Care, Healthcare, Air Fresheners and Food & Beverages businesses. We are focusing on strengthening our competitive edge in the marketplace by investing in scaling up our rural footprint and rolling out consumer-centric innovations," said Mohit Malhotra, CEO, Dabur India Limited.
In order to boost urban consumption, Dabur India is refining the go-to-market strategy to respond to the changing channel dynamics in urban India.
More than large firms, smaller manufacturers have seen higher volume growth rates in non-food categories over the last two quarters. This might be because smaller players face challenges in keeping prices stable in the food sector, while non-food categories with significant price increases have experienced higher volume growth. "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.
As rural markets continue to drive growth, urban metros see a shift toward e-commerce. "We are at about 7-8 percent of e-commerce contributing to overall business. This is faster than the average of our total business. It would that go to 15 percent in the next few years, it's likely. Q-commerce, too would play a role," Jawa explained.
Furthermore, the report highlighted that the rural growth is fuelled by 5.1 per cent rise in volume and a 5.6 per cent increase in prices. Interestingly, the number of unit sales was higher than overall volume. This also showcases a preference shift towards smaller packs. "Small packs are also growing faster because rural areas are now growing faster than the urban market. So, some of those effects are there. But for us, the mix has been better than it was last quarter," Jawa added.
Amidst a tight consumption scenario, companies underscored that resilience in a challenging operating environment marked by rising commodity prices, changing channel dynamics, and subdued demand across FMCG categories helped navigate the challenging period.
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