FMCG: While urban markets continued to grow and helped consumer goods companies increase quarterly volumes, they also pointed to a slow recovery in rural demand in the September quarter and stated that demand will improve “gradually”.
“There is undoubtedly a slowdown in the FMCG industry. There is a noticeable slowdown in rural areas. The rural economy has begun to falter a little, even though we are still moving farther into rural areas and into more villages. However, Varun Berry, executive vice-chairman and managing director of Britannia Industries Ltd., stated during the company’s post-earnings call on Thursday that “these are macro issues which companies like us cannot sort out.”
The company’s volume growth for the previous quarter was flat. In the June quarter, rural markets reported a 4% increase in volume, following a 0.3% increase in the March quarter. Although the September quarter’s volumes increased sequentially, businesses reported a sluggish growth rate. Growth also started from a lower base than the year before, when volumes fell into the mid-single digits.
According to Parachute Oil Manufacturer Marico, demand trends for FMCG products in the country during the third quarter were mostly consistent with those of the previous quarter. Urban sentiment gradually improved, but the company reported that the recovery in rural demand happened more slowly than anticipated due to higher food inflation and unequal rainfall distribution.
The September quarter saw a 3% increase in domestic volumes, according to the company.
The MD and CEO of the company, Saugata Gupta, stated in a Mint interview that rural demand is still behind urban demand. Having said that, demand is not the only factor contributing to the overall volume growth. There have been additional occurrences. Both inflation and downsizing have occurred, and in certain of our categories, the downsizing may have resulted in smaller brands or unbranded products, the speaker stated.
The business noted that there was little interest in more mass-market products like hair oils.
Rural recovery, according to Gupta, will now happen more gradually. We were worried in August since the monsoon scare had passed, but September’s rainfall more than made up for it. With that said, we don’t anticipate a particularly swift recovery; rather, it will be gradual,” he said.
Hindustan Unilever, the biggest packaged goods company in India, stated last month that rural demand remained muted and that volumes were only slightly declining over the previous two years.
Dabur stated that although demand in India’s villages is gradually increasing, rural markets are still trailing behind urban ones.
The syndicated data shows exactly what our business is experiencing. Looking back at the last three quarters, rural growth has been negative. The last three quarters have seen a shift from negative to positive territory. Thus, while the rural trajectory is still improving, we are surpassing a lower base. Rural areas will definitely continue to become more popular, even though it will happen gradually. The government is sustaining infrastructure investment, announcing MSP increases, and the upcoming election season, in addition to favorable crop seedings and rainfall for the winter crop, according to Mohit Malhotra, CEO of Dabur India.
