Godrej sees slowdown in rural FMCG sales

With more consumer goods companies rushing to tap the rural markets, Adi Godrej-led Godrej Consumer Products Ltd (GCPL) has warned that the rising cost of living might lead to a decline in rural sales in the short term.

“The rise in overall cost of living and concerns over decrease in social spending may have some impact on growth in rural FMCG sales in the short run, but over the medium-to-long term, wage increases and enhanced exposure to products will lead to sustained demand,” GCPL Chairman Adi Godrej said in the company’s annual report.

Companies that are innovative, agile and responsive to the needs of consumers would stand out, he said. The consumer goods sector had benefited in the past few years from a rise in disposable income in rural areas, where nearly 70 per cent of the country resides, he said.

 

FMCG firms net half their sales from rural markets now and continue to pursue expansion in rural areas. The Budget proposal to increase the allocation to the Bharat Nirman programme could further drive rural growth and boost sales, he noted.

“The government programmes like the National Rural Employment Guarantee Scheme and minimum support prices for farm produce have been increasing rural incomes and standards of living of these masses. This has also led to increasing awareness and exposure to consumer products and brand preferences, in line with urban consumers,” he observed.

Sounding bullish on the prospects of the sector during the current financial year after it being plagued by inflation and high interest rates during the previous year, he said, “Despite high interest rates, inflation and political uncertainties, the FMCG market continued to grow at a healthy rate in the last financial year,. Consumer demand remains strong and we are hopeful of that continuing.”