Pockets and packets shrink as urban consumers face budget squeeze

Companies say that the urban consumer is stressed majorly due to taking on loans and credit in various forms like personal loans and credit card debts

Urban consumers have been under financial stress over the past six months, prompting many to opt for smaller product packs or switch to unbranded items to manage household budgets.

 

Companies attribute this stress primarily to rising personal loans and credit card debt. Hindustan Unilever (HUL), one of India’s largest consumer goods firms, highlighted the weak urban consumption trend as buyers increasingly choose smaller packs.

 

During an analyst call following its earnings announcement, Rohit Jawa, chief executive officer and managing director of HUL, said, “At the moving annual total level, total fast-moving consumer goods (FMCG) volume growth has slowed over the past six months, indicating subdued demand. Urban growth continues to moderate, while rural recovery is gradually sustaining.”

 

Jawa further noted that market data for the quarter showed an uptick in the growth of smaller packs across the portfolio. “This appears to be a temporary shift in consumer behaviour caused by the current macroeconomic conditions and urban growth moderation,” he added.

 

At a media conference on Wednesday, Jawa mentioned that consumers are choosing smaller packs even within HUL’s premium brands.

 

Parle Products echoed similar concerns, reporting a slowdown in urban consumption.

 

“Urban stress stems from high debt levels, much of which has been accumulated through credit. We’ve observed consumers shifting to smaller packs, particularly in the general trade channel,” said Mayank Shah, vice-president of Parle Products. Shah, however, expressed optimism, expecting conditions to improve within three to six months.

 

An executive from a leading FMCG firm pointed out that urban stress is particularly pronounced in the northern and eastern regions of India.

 

“Consumers are under financial pressure, and in some cases, they’re downgrading to unbranded products to manage their budgets,” the executive explained.

 

The executive also emphasised that while rural markets are growing faster than urban ones, certain urban pockets are experiencing negative growth due to debt-driven spending constraints.

 

HUL reiterated that rural demand is gradually recovering, contrasting with the challenges faced in urban markets.