Recovery signs in rural consumption, but stress remains: Kantar report

The consumption of fast-moving consumer goods (FMCG) in rural India continues to trail behind urban demand. While urban FMCG volume growth was at 6.1 per cent, the rural sector only achieved 2.8 per cent in the moving annual term (MAT) in 2023, so far, according to Kantar’s FMCG pulse report for September,

“Urban has seen a revival in the past quarter in household care, while rural continues to be under significant stress,” stated the report.

Household consumption has seen growth on the back of the reintroduction of atta (wheat flour) into shopping baskets after the government ended its free grain distribution scheme. “The atta phenomenon has impacted urban (areas) more than rural, because as against growth of 25 per cent in urban, atta has grown by only 18 per cent in rural (areas) in the year. As a result, MAT growth without atta in both urban and rural is 1.7 per cent,” the report further said.

Grooming categories have also seen stronger demand from urban areas, growing by 4 per cent. Demand growth in this category from rural areas was only half of that in urban India. Urban demand for hot beverages has been robust, while rural demand led to growth for cold beverages.

But there have been some signs of recovery in rural demand, said the report. “Rural also vastly outpaced urban in terms of growth in the snacking sector -- 18 per cent growth versus about 11 per cent in urban. This means that, though rural is lagging urban’s overall growth, there are still strong pockets of growth in rural, and these being more discretionary means that rural is ripe for bigger growth in the next few quarters,” Kantar’s report said.

Following the announcement of results, Rohit Jawa, Hindustan Unilever’s (HUL) managing director and CEO, informed investors that India's per capita FMCG consumption is significantly low compared to other similar economies and within that, rural is highly under-indexed.

ITC also commented after its Q2 results that consumption demand has been relatively subdued especially in the value segment and the rural markets due to sub-par monsoons and persistent food inflation. However, it noted visible green shoots of recovery.