Rural demand for FMCG grows at a slower pace in March quarter: NielsenIQ

Rural demand for consumer goods slowed down in the March quarter but growth was four times faster than in urban areas, said market research firm NielsenIQ on Thursday.

 

Demand for fast-moving consumer goods (FMCG) in rural India stood at 8.4 per cent in the March quarter, compared to 9.2 per cent in October-December of 2024. Urban demand growth moderated to 2.6 per cent, compared to 4.2 per cent in the October-December quarter.

 

The FMCG industry had an overall growth of 11 per cent in the March quarter, driven by a 5.1 per cent increase in volume and 5.6 per cent increase in prices. “A higher unit growth than volume growth indicates preference shift towards smaller packs in consumers,” said NielsenIQ (formerly known as Nielsen). 

 

FMCG companies have spoken about the slowdown in urban demand. Sudhir Sitapati, managing director and chief executive officer of Godrej Consumer Products, told ‘Business Standard’ earlier in May he expected urban demand to recover in 12 to 18 months. Companies have said consumers are buying smaller packs.

 

"The FMCG sector is showing mixed signals — while 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,” said Roosevelt Dsouza, head of customer success – FMCG, NielsenIQ India.

 

“Rural markets continue to drive growth, whereas urban metros continue to see a shift toward ecommerce with higher shopper engagement. With a favourable monsoon forecast and revised tax slabs, consumption is likely to pick up in the upcoming quarters. Interestingly, small players are gaining more ground due to a low base and changing market dynamics, though their long-term momentum remains to be seen," he said.

 

Traditional trade, which is typically sales from mom-and-pop stores, in the March quarter increased to 6.2 per cent from 5.0 per cent in the same period last year. Modern trade declined 3.3 per cent in the quarter, compared to a dip of 1.1 per cent in the December quarter. 

 

Food consumption growth slowed to 4.9 per cent in the March quarter, compared to 6 per cent in the December quarter due to the decreased volumes in staple categories like edible oils and palm oil which saw price increases.

 

Home and personal care categories saw consumption growth of 5.7 per cent in the March quarter, recording higher rural demand.

 

“Ecommerce continues to strengthen its presence significantly in eight metros, impacting the share of offline channels — both modern trade and traditional trade. This growth is largely volume driven, supported by increasing online shopper penetration, more purchase occasions, and increasing basket sizes (more units purchased per shopper),” said the report.

 

Kantar Worldpanel, which tracks household consumption, also reported that rural demand for FMCG products moderated in the March quarter. Demand in rural markets grew 2.7 per cent in the March quarter and 4.4 per cent in urban areas, according to Kantar’s data. In the year-ago period, rural demand grew 6.3 per cent and urban 4.6 per cent.

 

"At the household level, urban [market] is driving growth. Smaller local brands are outperforming the bigger brands in urban, and are the main reason for the faster urban growth in the country. The bigger brands however, are stronger in the rural markets, indicative of positive rural aspirations. Things are expected to stay at a status quo, in the next quarter also," said K Ramakrishnan, managing director - South Asia, Worldpanel Division, Kantar.