Faster rural consumption is driving growth in the FMCG sector in India. A report by NielsenIQ indicated 11 per cent year- on-year growth in Q4 as rural growth outpaced the urban areas for the fifth straight quarter. Though this accounts for just over a third of overall consumer goods sales, it has become a bright spot for the FMCG industry.
The report highlighted that this growth is fuelled by 5.1 per cent rise in volume and a 5.6 per cent increase in prices. Interestingly, the number of unit sales was higher than overall volume. This also showcases a preference shift towards smaller packs.
Roosevelt Dsouza, Head of Customer Success – FMCG, NielsenIQ India, said, “Rural markets continue to drive growth, whereas urban metros continue to see a shift toward e-commerce with higher shopper engagement. With a favourable monsoon forecast and revised tax slabs, consumption is likely to pick up in the upcoming quarters.”
A rural push for FMCG growth
Rural consumer demand growth remained four times faster than growth in urban areas in Q4. Though the year-on-year comparison may show a slower pace compared to Q4FY24, the rural areas put up a better show compared to urban markets where consumption decelerated significantly more. Traditional trade volumes increased to 6.2 per cent in Q4FY25, from 5 per cent in Q4FY24.
Demand for personal goods higher
Now, in terms of categories, home and personal care (HPC) categories saw brisk demand while food consumption slowed in comparison, to 4.9 per cent in Q4FY25 Vs 6 per cent in the same period previous fiscal. This was primarily due to lower volumes in staple categories like edible oils and palm oil, which saw price increases.
Home and personal care (HPC) categories, meanwhile, clocked 5.7 per cent growth in the March quarter, with higher demand in rural areas. Furthermore, over-the-counter categories, such as rubefacients and analgesics, saw a 14 per cent growth in value sales in Q4FY25, driven by a 10.4 per cent increase in prices
Roosevelt Dsouza highlighted the contrasts in the FMCG sector, “volume growth is slowing across categories, non-food segments are still outpacing food. Inflation is easing overall, but high edible oil prices are keeping staples expensive.”
E-commerce way to go
In terms of retail channels, NielsenIQ said, e-commerce continued to strengthen its presence significantly in 8 metros, impacting the share of offline channels – both Modern Trade (share 22.8 per cent) and Traditional Trade (share 62.5 per cent). This growth is mainly due to higher sales volumes, especially in metro areas where e-commerce grew by 39.9 per cent. The increase is driven by increasing online shopper penetration, more purchase occasions, and increasing basket sizes.
Small manufacturers rejoice
Interestingly, Roosevelt Dsouza pointed out, small players are gaining more ground due to a low base and changing market dynamics. “Low base, rural growth, and easing out inflation are helping small players to outpace FMCG growth.” He however pointed out that one needs to watch out for long-term momentum for definitive trend analysis.