Volume growth of FMCG brands likely on demand recovery in rural areas
FMCG companies are likely to see healthy volume growth in the coming quarters as early green shoots of recovery in the rural demand are seen by industry players
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Bengaluru, 15 May: FMCG companies are likely to see healthy volume growth in the coming quarters as early green shoots of recovery in the rural demand are seen by industry players.
“Outlook on volume growth is positive. This is improving, especially, in rural India,” Abneesh Roy, Executive Director of Nuvama Institutional Equities said.
“Most companies will focus on volume growth and without any big sacrifice on margins. Pricing growth will come back for the sector after a negative pricing in FY24,” he added.
Rural markets had witnessed a sequential slowdown in the December quarter while urban volume growth ( 6.8 per cent) continued to outpace rural volume growth (5.8 per cent), according to NIQ data.
High inflation, and erratic monsoons were cited as the reasons behind low demand in the last financial year. However, many FMCG players have indicated that the tides are slowly turning with expectations of a gradual recovery in rural demand in the coming months.
“Worst is behind for entire FMCG sector and gradual recovery will continue due to a likely strong monsoon this year. Local players will lose market share due to base effect and normalization, scale up of adjacencies,” Roy added.
According to global research firm Kantar overall volumes, which indicate the number of products consumers bought, expanded 5.2 per cent in the March quarter, unchanged from the three months to December.
However, sales volumes in rural markets climbed 5.8 per cent, and in cities by 4.7 per cent as compared to a year earlier.
Already, large FMCG brands including Hindustan Unilever, ITC, Britannia, and Dabur have indicated that demand recovery in rural areas is likely in coming quarters on the back of a strong monsoon and likelihood of increased farmers’ income.
