Consumer goods companies were earlier expecting demand to recover in the December quarter. While that hasn’t materialised, chief executives said slowdown in consumption has come to a halt and that sales of mass-segment products are picking up after a gap of over three years.
“While green shoots of recovery are visible in rural India, the demand growth is still trailing urban markets,” Dabur India chief executive Mohit Malhotra said. “We are hopeful rural markets will post a strong recovery in the new year. We are already seeing the gap between rural and urban growth shrinking.”
Malhotra said urban markets have been the drivers of growth in 2023 with modern trade and ecommerce leading the way.
Neeraj Khatri, chief executive (India business) of Wipro Consumer Care, maker of Santoor soap, said some green shoots are evident in rural demand and consumer confidence is improving every quarter. “Price-led growth has tapered off in the industry and volumes are driving growth,” he said. “This should put industry on a better pedestal next year. Monsoon has been decent, so is government spending. It’s also time for rural people to come out from the debt (they had to avail) during Covid.”
While volume growth for the fast-moving consumer goods (FMCG) industry in urban India has been on a positive trajectory since April-June last year, rural markets have grown marginally this calendar year, according to market researcher NielsenIQ.In the September quarter, urban markets grew 10.2% year-on-year while rural grew 6.4%, it said. Before the Covid-19 pandemic, rural markets were driving overall growth, growing twice as fast as urban markets.But the demand has slowed down in the current quarter.
Discretionary spending may rise
Mayank Shah, senior category head at biscuits maker Parle Products, said volumes have stagnated in November-December with minor growth in value sales.
He, though, expects a revival next quarter. “With elections round the corner, overall spending in the economy goes up. This should help in revival and we expect next quarter volumes to grow at high single digit,” Shah said.
Lalit Agarwal, CEO of rural-focused apparel retail chain V-Mart Retail, also said signs of rural demand improvement are there despite continued inflation and unemployment. “But full recovery is expected around April-June, led by elections when rural economic activities get a boost,” he said.
Earlier this month, the Reserve Bank of India lifted the GDP growth forecast for FY24 to 7% from 6.5% estimated earlier following a better-than-expected July-September quarter.
