Rural consumption slowly recovering for FMCG firms

Bengaluru, 12 May After showing tepid recovery in the post pandemic period, the slowdown in rural consumption seems to have bottomed out and a recovery is likely in coming quarters.

This trend was visible from the fourth quarter performances of FMCG (first moving consumer goods) firms, which witnessed the pace of volume decline stabilizing.

Management of major FMCG firms expects rural recovery to gain pace in FY24 with falling inflation and good monsoon.

“The slowdown in the FMCG market has bottomed out. The improvement was led by volumes which have turned flat in this quarter versus mid-single digit decline in the December quarter,” Ritesh Tiwari, chief financial officer at HUL said in a post-earnings analyst call.

“The urban market continues to lead the growth, while the rural market has shown some signs of improvement with higher value growth, sequentially,” he added.

For Marico, FMCG urban volume grew by 5.3 per cent in the fourth quarter of FY23 while rural was flat with 0.3 per cent volume growth.

“The rural sector has most likely bottomed-out as the declining trend reversed in this quarter,” Nuvama Institutional Equities wrote in a note.

Britannia, which posted a good set of fourth quarter results, said that it is expanding its distribution reach in rural regions of the country for volume recovery.

““We delivered a robust growth of 11% in this quarter on the back of significant distribution gains, which reflects our execution strength across businesses & channels. We continued to accelerate our rural journey with focus on enhancing reach, partnering with 28,000 rural distributors, and sustaining our diligent market practices," Varun Berry, Vice Chairman & Managing Director, Britannia has said.

Rural sales constitute around 35 per cent of total sales of FMCG companies in India. Good monsoon, falling inflation and sound kharif sowing hold the key to rural consumption recovery in coming quarters.