Urban markets pull demand for daily groceries and essentials up in Q4

The quantity of FMCG goods purchased, or volumes, increased 2.1% in rural markets and 5.9% in cities YoY, the report said

Demand for daily groceries and essentials increased 3.9 per cent in the quarter to March, highest in two years, driven primarily by urban markets even though sales in villages improved, said an Economic Times (ET) report.

According to data from Kantar Worldpanel, a global consumer research firm owned, the quantity of fast-moving consumer goods (FMCG) goods purchased, or volumes, increased 2.1 per cent in rural markets and 5.9 per cent in cities year-on-year (YoY).

A year before, the overall market fell 1.3 per cent during the quarter, entirely dragged by a 3.7 per cent drop in urban demand, the report said.

"The effect of inflation and monetary tightening on economic growth and demand appears to be waning," said Sunil D'Souza, managing director of Tata Consumer Products, adding, "We are seeing demand gradually returning, especially in India."

Kantar monitors household consumption and also has goods from the unorganised end of the business, notably in large and voluminous categories like staples. Food and beverages led growth during the quarter due to the strong performance of wheat flour in March.

Kantar's South Asia managing director K Ramakrishnan told ET that this was due to households returning to the category after the government discontinued free grain delivery. As a result, the current rate of growth is not comprehensive.

In recent months, companies have reversed grammage reductions to support volume growth in the face of easing inflationary pressures. In addition, as they attempt to lower product prices, the majority of companies anticipate a gradual improvement in volume-led growth and recovery in rural areas.

According to HUL managing director Sanjiv Mehta, if a trigger caused commodity prices to decline, that would be the most powerful motivator of increased demand. Inflation hurts people, especially those at the bottom of the economic ladder, and if it lowers, it would surely boost consumption. 

We had 11 per cent price rise in the December quarter; now it is 7 per cent, and it will fall even further in the following quarter. That is the entire cycle until it achieves equilibrium, when it will be roughly 70 per cent volume growth and 30 per cent price rise, Mehta noted.