FMCG market to recover completely only by April-June quarter next year

Sales of daily groceries and essentials increased 8.5% YoY between April and June; the highest increase in a decade. FMCG sales was up 5.3% in rural markets and 12% in cities from a year earlier. However, consumption in villages only grew by 2%. Analysts believe the high increase in sales was largely due to the government offering free food grains, notably atta, which saw a growth of 8.5% during the quarter.

Rural demand for daily household products and groceries has been challenging in villages, potentially impacting the overall consumer goods sector's volume growth. Rural volumes, which have been lagging urban growth for over a year, could either decline or remain flat due to inflation and the proliferation of smaller regional players. Upcoming general elections and a further reduction in inflation are likely to lead to a gradual improvement in FY25.

Indian Consumers: While the affluent segment gravitated toward luxury apartments, high-end cars, and premium consumer goods, lower-income brackets grappled with inflation and rural hardships. Sales surged for luxury items, bustling malls and restaurants, alongside a spike in hotel room rates due to heightened demand. Conversely, FMCG companies faced stagnation in selling everyday items like biscuits, soaps, shampoos, and perfumes, yearning for increased consumption rates.

The maker of Saffola and Parachute oil brands said constraints on liquidity and profitability in the general trade (GT) channel remained an overhang, while alternative channels continued to fare well. It has initiated significant steps towards improving the return on investments of its general trade partners and structurally re-igniting growth including a primary stock correction.

Marico, maker of Parachute and Saffola oils, said the second quarter started on a positive note - with increasing demand trends in rural and urban areas in July - but saw a noticeable drop in overall sentiment, especially in rural areas, during August and early September.

India Business News: The FMCG industry in India faced challenges in the September quarter due to subdued consumer demand and a decline in rural consumption. Factors such a

Abneesh Roy says: “In our view, in Q3, most of the companies will see flat to low-single digit volume growth in the rural areas while urban areas will be growing faster. Even in Q4, we do not see a big recovery in rural demand currently. Our sense is the recovery will happen in FY25, based on Rs 1 lakh crore election spending, government stimulus, freebies, etc.”

There are 2,109 non-financial companies in the Prowess database for which December quarter results are available along with quarterly results for the last five years. | Latest News India

Consumer goods companies were earlier expecting demand to recover in the December quarter. While that hasn't materialised, chief executives said slowdown in consumption has come to a halt and that sales of mass-segment products are picking up after a gap of over three years. While volume growth for the fast-moving consumer goods (FMCG) industry in urban India has been on a positive trajectory since April-June last year, rural markets have grown marginally this calendar year, according to market researcher NielsenIQ.

In their September quarter earnings commentaries, top FMCG companies like HUL, ITC and Nestle flagged worry over uneven rains, the impact of crop output and rising prices of some commodities (wheat, maida, sugar, potato, coffee, etc).