Surge In Rural Consumption: Boon For FMCG Industry
The Fast-moving consumer goods (FMCG) Industry recently saw a surge in the demand in rural areas, which is being hailed as a revival in rural consumption. Daily essential consumption saw more than 10 per cent increase for certain major brands in the rural areas. An example to observe the same would be of the 10-12 per cent sequential surge recorded by Adani Wilmar, in July over June.
Emami officials, too, observed that the recovery has been gaining up over the recent times. Industry experts point out declining agricultural-inflation in these past few months as a major factor for this revival. Covid-induced reverse migration in 2020 leading to increased sales and the consequent relative lower base of last year was pointed out as another reason for the same.
Two-year basis data shows urban area volumes in the sector to be flat, whereas the rural records a surge of 5 per cent. The July records this year prove how interesting it is to observe a strong revival in rural consumption while the urban sales growth records a decline by 6.9 per cent. In the period between September 2021 to June 2022, the same rural consumption had faced a steady decline. Reduction in daily wages, inflation in daily essential items and fuel are major reasons attributed for this.
Angshu Mallick, CEO, Adani Wilmar said “The rural market is very important for every FMCG company including us. We are witnessing a robust demand across rural markets on the back of recent reduction in prices. With stabilising prices owing to the macro-economic factors, we are confident that the rural economy will continue to open up through the second quarter of the current financial year. The consumer sentiment is positive and we are expecting the festive season to bring in more demand. This should result in the second half of the year from July-December to be better than the first half of 2022.”
“As we chart the next phase of growth, we plan to aggressively invest in strengthening our retail network to increase distribution in smaller towns and villages across India, stepping up efforts to expand in rural areas," Mallick added.
With the upcoming monsoon season, this revival could be leveraged by the FMCG companies to further the surge in consumption of daily essentials.
Krishna Mohan Nyayapati, Director, Emami Agrotech Said, “The high inflation has impacted almost all categories over the couple of months both in urban and rural India. Added to the same, extreme summer also impacted the consumptions across many categories. Further, in the rural areas, the consumption of major brands has been impacted as consumers there-in shifted to lower priced alternatives or have started consuming less. However, from June onwards we are witnessing a global melt-down in prices of most of the commodities which will drive consumption back.
With good monsoons predicted and also with the commodity prices cooling-off we might see a good uptick in sales from September/third quarter of the financial year onwards which is also the festive period.”
“Accordingly, to our estimate, we expect to see the strong growth revival in the packaged food category almost immediately and then would see revival in the other categories. The edible oil commodity price melt-down would help Emami Agrotech positively as we expect both in-home and out-of-home consumption to grow exponentially especially for edible oil category in the back-drop of good monsoon, higher income and up-coming festive period,” Nyayapati added.
Palm oil is an integral consumption product apart from daily essentials. As per reports, from the sudden hike in its prices which went up to about $1,800/MT, the reduction to reach a level of $1,200/MT is set to thrust the volume growth in the second half of the fiscal year. On a closer analysis of the types of products that recorded high consumptions in rural areas, hygiene and health related products emerged as a significant choice. This was followed by packaged food items like biscuits, honey, etc. When it comes to personal care products, only soaps saw a rising demand in these areas. Experts also observe how most people preferred smaller sized products, for instance, sachets instead of bulk offer items.
About 35 per cent contribution is recorded by villages to the FMCG Industry sales. Hence, the FMCG Industry strategizing to encash the opportunity of the surge in rural consumption would become pivotal for India’s growth story in the coming times.
