"The month of November saw rural volumes growing 6-7%, compared to 2-3% in the previous two quarters," said Mayank Shah, senior category head at Parle Products, which crossed $2 billion in annual revenue in FY22. "We believe this is on account of a good harvest season and inflation tapering off."
India's villages, which contribute more than 35% to overall annual FMCG sales, are crucial for overall revival of the sector. Executives said good seasonal harvests, resulting in improved liquidity in the hands of farmers, higher government spending on infra, and the wedding season are aiding consumer sentiment in India's villages.
"We are seeing recovery in rural demand since the last three weeks, specially for our low unit packs (LUPs)," said Ankush Jain, chief financial officer at Dabur India, which makes Vatika shampoo and Fem bleach. "We are also observing some moderate recovery in discretionary categories like our personal care products, which we believe is because of the wedding season."
The company, which derives about 47% of its sales from rural India, said it is stepping up direct distribution to cover more than 100,000 villages as demand starts recovering in rural areas.
"We are seeing indications of demand improvement in rural markets, which is core to our business," said Emami managing director Harsha Agarwal, maker of BoroPlus cream.
Reasons for Price Rise
"We are hopeful this will sustain and improve more in the coming quarters, in preparation of which we are stepping up investments on product availability, direct distribution and reach," Agarwal said. Rural markets contribute about 45% to Emami's annual sales.
The market was squeezed over the past two years by the pandemic-induced disruption of supply chains and distribution channels, followed by unprecedented inflation of commodities, fuel and packaging. This led companies to increase prices of packaged goods, including daily essentials, forcing consumers to either buy cheaper packaged goods, or buy less of grocery and personal care products.
"Higher minimum support prices for key crops and increased spending on rural infrastructure by the government, would aid rural growth and help gradual recovery in rural demand," ratings agency Crisil Ratings said in its quarterly outlook update. Executives at Marico, Wipro Consumer and Britannia also said rural demand has begun showing signs of recovery after five-six quarters.
Neeraj Khatri, CEO at Wipro Consumer Care, which makes Santoor soap, said: "Rural growths are trending better after a few quarters and with inflation stabilising, should do better next year."
Lux soap and Brooke Bond tea maker Hindustan Unilever had forecast in its September quarter earnings announcement that it expected demand in rural markets to begin recovering from the December quarter onwards, with inflation easing and better consumer sentiment on account of a good harvest.
Finance minister Nirmala Sitharaman said in the Rajya Sabha on Wednesday that the government is keeping an eye on inflation, which was purely extraneous due to the prices of fuel and fertiliser. Wholesale inflation has dropped to a 21-month low.
FMCG rural demand shows signs of green shoots after 2 years - The Economic Times
Read More
No comments:
Post a Comment