Normal monsoon drives August FMCG sales up nearly 7% in rural areas: Bizom

In comparison, urban sales were up 5.5% month-on-month

Demand for fast-moving consumer goods in rural India grew 6.7 per cent in value in August, while urban areas registered a value growth of 5.5 per cent over July, as consumption in rural areas increased due to normal and above normal monsoons in most parts of the country, according to data by Bizom.

In August, overall FMCG sales growth was up 6.3 per cent by value in August on a month-on-month basis.

“Monsoons continue to be normal and above normal in large parts of India, except in parts of North and North-East India,” Akshay D’Souza, chief of growth and insights at Bizom told Business Standard.

He added, “With the festival season upon us and with inflation softening, we're seeing consumers also increasing their spends on discretionary products as we see an increase in social interactions.”

In August, overall value growth in megacities was 5.4 per cent MoM. It was 5.5 per cent higher in tier-2 cities and 6.0 per cent in tier-3 cities, according to data by Bizom.

Mayank Shah, head of the category at Parle Products, said, “During the rabi harvest season 4-5 months ago, farmers got good realisations for their wheat crop and the other agricultural produce. Thankfully, the government didn’t ban exports then, it was only after the harvesting season was over and the crops were already sold and at a much later stage, that the government brought in export restrictions.”

Shah said crop realisation during the rabi season and current monsoon has been good in most areas save Uttar Pradesh and Bihar. A normal or above normal monsoon is expected, due to which there will be a revival in demand in the largely agriculture-driven rural economy. He expected this demand to sustain for the rest of FY23.

“Rural demand was neutral in the second half of FY22 and as a result of a low base, I think, we will see better demand or better growth from rural India. It would outpace urban demand as well in the coming quarters,” Shah said.

D’Souza said that FMCG sales in August could signal a turnaround for the industry as the country heads into more festivals in the months ahead. “With gifting and celebrations being key elements of festival consumption, we do see strong sales coming up for FMCG in the months ahead too,” D’Souza said.

Rural growth ahead of urban areas comes as a relief as FMCG companies have been calling out weak rural demand since September last year. 

Post the April-June quarter results, Sanjiv Mehta, MD & CEO of Hindustan Unilever told investors, “If I were to look at the total FMCG is at seven per cent, urban is slightly above nine per cent and rural is about four per cent. But when I look at the volume growth for the last three months, urban is about -3 per cent and rural is -7 per cent and this is the closest you can do to assess the rural demand.”

Mehta also told investors then that rural demand remains soft.