FMCG sales: Rural India pulls ahead in Q4FY23, shows Bizom data

Q4 kirana stockpile across products powers FY23 sales growth

Sales of fast-moving consumer goods (FMCG) in rural areas rose sharply in the fourth quarter of 2022-23, while urban sales grew at a slower clip. As a result, sales for the whole year as well grew faster in rural areas than urban, according to the data from Bizom, a retail intelligence platform.

The rural push is being attributed to stocking up at kirana stores across product categories, as well as a push to build stocks for summer products driven by forecasts of unusually high temperatures.

Rural consumer goods sales rose 16.8 per cent in January-March this year (Q4), showing 8.9 per cent growth for the full financial year (FY23). Urban sales grew 7.9 per cent in Q4, ending the full year with 5.5 per cent. Overall, FMCG sales, urban and rural combined, grew 14.1 per cent in the fourth quarter and 7.8 per cent in the entire financial year.

This growth comes despite inflation eating into demand. However, industry experts do not see it as a strong indication of a well-rounded recovery because discretionary spends — such as on beauty, personal care and confectionery — have yet to pick up. Of late, there have been fears of a K-shaped recovery in consumer goods, in which certain segments, usually those already doing well, recover much faster than some others.

“Fears of a K-shaped recovery remain because the discretionary category has witnessed pick up only in certain categories,” Akshay D'Souza, chief of growth and insights at Bizom, told Business Standard. 

Personal care saw a decline in Q4 and only a 0.1 per cent increase in FY23. Confectionery witnessed a pickup of 12.1 per cent in Q4, but only of 3.5 per cent in FY23.

“In FY23, rural areas did show signs of lower spends driven by inflationary fears after the festival season. However, in Q4 we see a strong reversal in rural stocking, driving double-digit growth and this has led to a moderate growth in the financial year,” said D’Souza.

Beverage sales grew the most in FY23 on the back of a hot summer last year and stocking up for a hotter one being predicted this year. Commodity products sales have been steady, as prices declined after December, helping FMCG post high single-digit growth for the year. The first quarter witnessed strong growth because of the weak base in the comparable quarter of the previous year due to Covid-induced disruptions.

“We have seen a strong increase in direct distribution in rural... This is really the key for most large FMCG companies despite the challenges,” D’Souza said.

Dabur India, in its quarterly update ahead of its results, said the demand trajectory in both urban and rural areas showed a slight improvement sequentially — in comparison to the previous quarter — and added that it fell short of a full recovery.

“Demand has seen an improvement for the past four to five months and it has remained strong. Rural demand is pushing up the number due to farmers getting a good price for their rabi produce,” said Mayank Shah, senior category head at Parle Products. Dabur sees its food and beverage business showing healthy double-digit growth.

Adani Wilmar, the edible oil company, said in its business update that prices had cooled off from historically high levels and were stable, stimulating higher consumer demand, particularly among the rural population.

Godrej Consumer Products, in its business update, said domestic consumer demand trends remained steady through the quarter. “The performance of our India business has exceeded expectations, especially on the volume front,” the maker of Cinthol soaps said about its fourth quarter performance.

Marico, another FMCG company strong in hair oil, sees similar demand trends. In its quarterly business update, it said: “During the quarter, the sector continued to witness a gradual recovery with year-on-year volume trends improving in each quarter. While urban and premium categories were stable, an easing of broader commodity inflation bodes well for overall consumption trends, especially in the rural markets.”

Marico anticipates a more visible and sustained recovery in FMCG demand in the coming quarter based on improving macroeconomic indicators.

Bizom, in its outlook for 2023-24, expects food inflation to trend lower worldwide. “In India, with the competitive scenario intensifying for FMCG, we do expect to see a drop in prices across categories, which could definitely help boost consumption,” D’Souza said.