Rural Demand Fuels FMCG Growth; Sector Grows 5.7% in July-September: NielsenIQ

The consumption of packaged food items saw an uptick in both rural and urban India, rising to 3.4 per cent in the July-September period, compared to 2.1 per cent in the previous quarter

India's fast-moving consumer goods (FMCG) sector saw a 5.7 per cent growth in value and 4.1 per cent growth in volume during the July-September quarter, according to consumer intelligence firm NielsenIQ. Price growth stood at 1.5 per cent, while rural volume growth reached 6 per cent, surpassing urban growth for the third consecutive quarter, despite a slowdown in consumption across both regions.

“The Indian FMCG industry shows resilience with steady value growth and marginal price increase. Rural volume growth at 6 per cent continues to surpass urban markets despite softer consumption in both regions this quarter. Small manufacturers are rebounding after recent decline, while major players trail in value growth," said Roosevelt D’souza, head of commercial – India at NielsenIQ, in a press statement. 

Rohit Jawa, managing director and chief executive officer of Hindustan Unilever Ltd (HUL), said in the company’s earnings release earlier: “In the September quarter, FMCG demand witnessed moderating growth in urban markets while rural demand continued to recover gradually. In this context, we delivered a competitive and profitable performance.” 

Hindustan Unilever, the maker of Lux soaps, announced that rising crude palm oil prices have led the company to implement gradual price hikes, allowing it to pass on the increased commodity costs to consumers.

“In big cities, there is a trending down of growth, and I include all channels in all segments…Let's not forget that the urban has been driving the engine of the FMCG industry for the last several quarters. We are operating a high base, and some normalisation is probably to be expected,” Jawa said. 

NielsenIQ observed a sequential consumer demand recovery across urban and rural regions. Urban demand grew by 2.8 per cent, while rural demand increased to 6 per cent, up from 5.2 per cent in the April-June quarter. 

In fact, rural volume growth outpaced urban growth in most regions of the country.

“Traditional trade volumes grew by 4.1 per cent in Q3 2024 (July-September), compared to 3.0 per cent (April-June) in Q2 2024. Despite the slowdown, modern trade manages to outpace urban growth,” said NielsenIQ.

The consumption of packaged food items saw an uptick in both rural and urban India, rising to 3.4 per cent in the July-September period, compared to 2.1 per cent in the previous quarter. This growth came even as prices for edible oils, packaged atta (wheat flour), and spices increased. Meanwhile, the consumption growth of household products remained stable at 6 per cent, compared to 6.7 per cent in the April-June quarter.

NielsenIQ also highlighted that large players continued to outperform smaller and mid-sized competitors. While small manufacturers showed a sharp recovery in food volumes and grew faster than the giants, the larger companies saw slower value growth and declining volume growth compared to the April-May-June 2024 period.