Rural areas boost FMCG sales, bringing positive outcomes

In a significant shift, India's packaged consumer goods industry witnessed a notable turnaround in the March quarter, with rural demand surpassing urban markets for the first time in 15 months.

Over the past year, rural markets have posed a significant challenge for India's fast-moving consumer goods (FMCG) companies, even as urban consumers compensated with increased spending on packaged products.

According to consumer intelligence firm NielsenIQ, the FMCG industry reported a robust 6.6% growth in value terms in the March quarter, driven by a 6.5% increase in volumes. This marks a notable reversal after a prolonged period of urban dominance.

Roosevelt Dsouza, Head of Customer Success, India at NielsenIQ, noted, "The FMCG industry's growth continues to be driven by consumption trends in Q1’24 (JFM’24), with rural areas surpassing urban growth for the first time in five quarters."

NielsenIQ highlighted a gradual uptick in rural consumption, which outpaced urban consumption during the March quarter.

While urban markets reported a 5.7% year-on-year increase in demand, the growth rate was slower than the 6.9% surge witnessed in the December quarter. In contrast, rural demand surged by 7.6% year-on-year in the March quarter, underscoring the resilience of rural markets.

The retail sector also witnessed a divergence between modern and traditional trade channels. Modern trade, including large format retail stores and e-commerce platforms, reported robust double-digit volume growth of 14.7% in the March quarter. Meanwhile, traditional trade experienced stable growth, with volumes increasing by 5.6%.

Both the food and non-food sectors contributed to the overall growth in consumption across India. While the food sector reported a volume growth of 4.8% year-on-year, down from 5.3% in the previous quarter, the non-food sector witnessed a significant improvement. Consumption growth in the non-food category reached 11.1% year-on-year in the March quarter.

NielsenIQ attributed this improvement to an increase in rural consumption, particularly in personal care and home care categories. In urban areas, the non-food sector also saw rising consumption, particularly in personal care products.

The revitalization of rural demand signals a potential shift in consumption patterns, with FMCG companies likely to recalibrate their strategies to capitalize on the burgeoning rural market opportunities.