India's FMCG market grew in Q3 FY24 on higher consumption: Report

Rural demand is on the recovery path, marked by a growing preference for larger packs: NielsenIQ

India’s fast-moving consumer goods (FMCG) industry grew 6.4 per cent in volumes in the October-December quarter on the back of positive consumption across the country, NielsenIQ (NIQ) has said in its report.

The research firm said value growth in the industry stood at 6 per cent in the quarter.

However, there has been a moderation in consumption growth within the FMCG sector compared to the sequential quarters across the country.

Price growth during the quarter came in at minus 0.4 per cent, causing value growth to be lower than volumes growth.

In rural areas, there has been a sequential slowdown in volumes growth with consumption experiencing a slight decline during this quarter.

The decline, however, is more pronounced in urban areas. Traditional trade has witnessed lower consumption sequentially at 5.3 per cent in the quarter ended December compared to 7.5 per cent in the July-September quarter.

On the other hand, modern trade witnessed double-digit growth in consumption at 16.8 per cent.

“Despite certain challenges, the positive momentum in Modern Trade adds a promising dimension to the overall market scenario,” NielsenIQ said in its report.

The average pack sizes in urban markets continued to remain positive and consumers have been opting for larger packs. As rural demand is on the recovery path, the research firm said there was a growing preference for larger packs there as well.

“For the first time in 2023, consumption gaps between urban and rural markets narrowed. The northern and western regions are contributing to this phenomenon. The favourable interim Union Budget 2024-25, supporting several economic boosters for the rural sector, should augur well for companies with a rural strategy,” Roosevelt Dsouza, head of customer success at NielsenIQ India, said.

He added despite a sequential-quarter decline, the rural recovery narrative continued to evolve throughout the year.

“In Q4 2023, we observe an uptick in consumption, primarily driven by habit-forming categories (such as biscuits and noodles) in food and essential home products. These categories have thrived despite flat to negative price growth, indicating resilience and sustained demand,” he said.

However, FMCG companies pointed towards a persistent slowdown in rural demand.

At its post Q3 FY24 earnings press conference, Hindustan Unilever’s chief financial officer, Ritesh Tiwari, attributed the relatively weak showing in Q3 to an uneven monsoon on kharif output, which affected agricultural yields and rural incomes.

“Lower reservoir levels continue to be a concern for rabi crops. The delayed and milder winter this year has impacted winter categories. Furthermore, rural consumer sentiment remained subdued. The anticipated buoyancy from the festival season did not materialise,” said Tiwari.

Marico said in its post-earnings release for the December quarter that rural demand remained soft.

During the quarter, both the food and non-food sectors’ consumption grew as more units were purchased in the foods category compared to last year, while in non-foods, larger packs were purchased. 

“The volume growth in the food sector was at a rate of 5.3 per cent compared to the same period last year, down from 8.7 per cent in Q3 2023 (July-September quarter). This slowdown in growth is primarily due to products falling under staples (such as refined and non-refined edible oils, etc.) and Impulse (such as confectionery, etc.) categories,” the report said. 

Within the non-food categories, there is an improvement, with volume growth reaching 9.6 per cent in the quarter ended December compared to last year, an increase from the 8.7 per cent recorded in July-September. 

NielsenIQ said that this improvement can be attributed to an increase in rural consumption growth, with a growth rate of 9.8 per cent in Q4 (October-December quarter). 

In its outlook for 2024, NielsenIQ noted that the Indian FMCG market remains resilient and pegs it to grow at 4.5-6.5 per cent in 2024. 

“This outlook reflects the industry's ability to navigate complexities and adapt to evolving market dynamics. The continued strength of the FMCG sector underscores its significance in the Indian economy and its ability to flourish despite external pressures, offering promising opportunities in the future,” the firm said in its report.