Rural sector, small towns boost FMCG Q1 sales by 14%, small packs rule

Mumbai: India’s fast-moving consumer goods (FMCG) industry reported a 13.9% year-on-year (y-o-y) sales growth in value terms and a 6% rise in volumes during the quarter ended June, powered by sustained rural demand and a steady urban revival, according to global marketing research firm NielsenIQ (NIQ).

The market recorded a 7.4% increase in prices during the period, with unit growth outpacing the overall volume growth, signaling a stronger consumer preference for smaller packs, the firm said. This points to the affordability factor in the sector, especailly in rural areas and smaller towns.

“The Indian FMCG sector continues to demonstrate resilience, with rural markets leading the charge for six consecutive quarters. While urban recovery is gaining traction, particularly in smaller towns, rural demand remains the cornerstone of volume expansion,” said Sharang Pant, head of FMCG customer success at NIQ in India.

In the March quarter, the country’s FMCG sector had reported a y-o-y rise of 11% in value, 5.1% in volume and 5.6% in prices, according to NielsenIQ.

“With inflation easing and a favourable monsoon forecast, the outlook for consumption remains optimistic. However, sustaining this momentum will require deeper channel engagement and sharper, value-led propositions…” Pant said. “Additionally, the rapid rise of small manufacturers outpacing overall industry growth highlights shifting market dynamics and intensifying competition.”

Rural India has outpaced the urban regions in volume growth for six consecutive quarters, recording an 8.4% increase in volumes compared to 4.6% in the urban areas. However, the gap is narrowing as urban areas show signs of sequential recovery. This resurgence is primarily driven by smaller towns.

In the June quarter, food consumption largely remained stable with a 5.5% volume growth, driven by the staples and impulse categories. Home and personal care (HPC) saw a stronger momentum, with 7.5% consumption growth.

“E-commerce continues its upward trajectory, gaining ground on modern trade (MT) in eight metros. Even though e-commerce accounts for just 11-13% of the FMCG value share in metros, it’s already delivering more than half of the omnichannel growth,” NIQ said. “Despite the pullback of quick commerce dark stores, June quarter consumption in e-commerce surged—driven by higher shopper penetration and consistent spending, even among new shoppers.”

The growth trend cited by NIQ report is in line with the positive commentary from large listed FMCG companies in the June quarter.

Last month, Hindustan Unilever Ltd (HUL) pointed to resilience and improvement in both urban and rural informal sectors. The company reported a 4% jump in its June quarter consolidated volumes.

Rohit Jawa, HUL’s outgoing chief executive officer and managing director, had then said that several key factors are expected to boost consumer spending, including income tax rebates, lower interest rates that will ease personal loan burden, and softening food inflation. Consequently, HUL expects the first half of the current fiscal year to outperform the latter half of the previous one, Jawa had told reporters last month.

Last week, Saugata Gupta, managing director and chief executive offficer of Marico Ltd, had said the FMCG sector was seeing stable-to-improving demand trends. “Looking ahead, we anticipate a gradual uptick in overall demand patterns in the quarters ahead, aided by a combination of easing inflation levels, favourable monsoon season and continued policy support,” Gupta said.

Gupta had said India’s rural demand was fairly resilient due to good monsoon rains and government’s minimum support price for key crops, while the urban demand was linked to food inflation.

“Urban demand is improving… I don’t think the consumption was that muted. Especially now that food inflation has come down, along with some part of the entire tax break; people will use part of that money to pay off EMIs (equated monthly instalments for loans), buy durables, better cars, upgrade mobile phones or towards entertainment…” Gupta had said in a separate interview with Mint last week. “As a result, you have to innovate and continue to grow,” he added.

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}