Urban FMCG Demand Rebounds in March Quarter, Rural Markets Remain Flat
India’s fast-moving consumer goods (FMCG) sector saw encouraging signs of revival in the March 2024 quarter, primarily driven by an uptick in urban consumption. According to data from analytics firm NielsenIQ, urban markets posted a 6.4% volume growth, boosting the overall industry growth to 6.5% year-on-year.
The rebound highlights a shift in consumer sentiment across cities, supported by easing inflation, improved consumer confidence, and increased activity in modern trade channels. However, rural markets, which have historically been a strong growth engine for the industry, saw a marginal 0.3% increase in volume—raising concerns among industry stakeholders.
“Urban markets are reviving faster, with consumers returning to discretionary categories and modern trade formats gaining ground,” said Satish Pillai, Managing Director at NielsenIQ India. The report indicates improved offtake in personal care and beverages segments, signaling a consumer pivot back to non-essentials.
Modern Trade Leads Channel Growth
Modern trade emerged as the fastest-growing distribution channel in Q1 2024, witnessing double-digit volume growth of 12.2%. This expansion is attributed to the increasing penetration of organized retail, wider product availability, and stronger promotions that resonated with value-seeking consumers.
In contrast, general trade and traditional retail formats—still dominant in rural areas—struggled to maintain momentum, hampered by uneven monsoons, stagnant rural wages, and delays in government-led rural development schemes.
Challenges Persist in Rural Consumption
Despite expectations of a rural recovery post-pandemic, consumption in India’s hinterland remains sluggish. Analysts point to limited income growth and erratic weather patterns affecting agricultural productivity. The flat volume growth in rural regions could put pressure on FMCG firms heavily reliant on rural penetration for topline growth.
Category Performance Reflects Consumer Reprioritization
Essential categories like packaged foods saw stable growth, while personal care and discretionary segments registered significant improvement in urban centers. This trend illustrates a gradual shift in consumer priorities, favoring both convenience and experience-driven purchases as economic pressures ease in city markets.
As the sector moves forward, manufacturers and retailers are expected