 "Rural volumes grow for second straight quarter in 2023, shows NIQ data")
The rural fast-moving consumer goods (FMCG) market grew 4 per cent year-on-year (Y-o-Y) in the April-June 2023 quarter, as against 0.3 per cent growth in the previous quarter, on rising consumption, a report by NIQ India (formerly NielsenIQ) showed on Thursday.
According to the report, rural market recovery was primarily driven by the non-food category. The report marks a significant change, as rural markets were in negative territory for several preceding quarters, with a decline of 2.4 per cent in the same quarter of the last calendar year.
NIQ’s FMCG Snapshot for the June quarter revealed that the FMCG industry in India grew at 12.2 per cent in value, compared to 10.2 per cent growth in the previous quarter and 10.9 per cent in the year-ago period. The quarter also saw an overall volume growth of 7.5 per cent, the highest in eight quarters.
“Q2 of 2023 is the best quarter in a year and a half, with positive strides across all growth vectors we track. Recovery in rural markets…combined with a 21 per cent plus growth in modern trade, augurs well for the upcoming festive seasons,” said Roosevelt D’Souza, lead, customer success, NIQ India.
D'Souza also emphasised the importance of focusing on the right assortment and pack sizes of products, adding that a reduction in input costs, if passed on to consumers, would boost consumption and benefit manufacturers, retailers, and consumers alike.
However, despite the data showing a revival in rural consumption, some companies still highlight lingering weakness in rural demand.
“With most commodities remaining stable in the quarter, inflation continues to be moderate. Consequently, we are seeing the gradual recovery in market volume growth. FMCG market volumes grew in mid-single digit led by urban,” Ritesh Tiwari, chief financial officer at HUL, had said in a press conference after its results.
More From This Section
“Rural market volumes, which at one point were declining in double digits, have just turned positive. However, we need to be cognizant that this growth has come on the back of volume decline in the base. If you look at market growth on a two-year CAGR basis, total volume growth is still marginally negative,” Tiwari had added.
Meanwhile, urban markets continued to see momentum in consumption growth at 10.2 per cent in Q2 of 2023, up from 5.3 per cent in Q1.
At the all-India level, food continued to drive consumption growth at a rate of 8.5 per cent in Q2 ’23, up from 4.3 per cent in Q1 ’23. Staple and impulse categories were driving overall growth, and consumers in cities and metros were leaning back towards habit-forming categories.
The non-food categories also showed improvement, growing to 5.4 per cent in Q2 from 0.2 per cent in Q1. This can be attributed to a revival in rural consumption growth through home care categories, with urban non-food consumption growth also improving (8.9 per cent in Q2, 2023 from 3.9 per cent in Q1, 2023).
The report pointed out that small manufacturers were driving value and volume growth, particularly in rural areas, while in urban regions, volume growth was equal for large and small manufacturers.
HUL has observed a resurgence of small and regional players as commodity prices have started to decline, and other industry figures like Varun Berry, executive vice chairman and managing director at Britannia Industries, have noted increased competition from regional players.
Satish Pillai, managing director, NIQ India, commented on the softening of India's inflation rate and the decline in food inflation, noting that it has led to increased confidence in spending across retail channels.
The overall drop in price growth, driven by food categories, has had a positive impact on consumers and is expected to be mirrored in the build-up to the festive season, added Pillai.