BENGALURU: FMCG growth is being propelled by rural more than the urban population, mainly due to the huge migration of people from metros to smaller towns and villages. Sale of biscuits, flour, oil have gone up significantly and are growing at double digits compared to urban areas.
The consumption is happening across value products more than premium ones, as people remain conservative on discretionary spending. But the volume growth comes as a relief to companies after growth crashed last year due to a weak economy. “With the monsoon looking good, we are hopeful it will further increase the purchasing power in rural areas,” said Parle Products category head Mayank Shah. Biscuit sales are up in the double digits now, compared to single digits in urban areas. For ITC, consumption levels of Sunfeast biscuits have substantially increased in non-metros as well, Hemant Malik, CEO of its foods division, said.
Consumption growth in rural India, which makes up more than a third of the total expenditure on FMCG, has reached about 85% of pre-Covid levels and has outpaced urban, which was at 70% in May, as per Nielsen’s latest data. Apart from workers returning home, the government’s higher allocation to the MGNREGA scheme, which has led to more jobs, the higher farm income due to a good monsoon, and lower disruption in retail channels have also helped. In contrast, job losses, salary cuts and continuous lockdowns have impacted urban recovery.
Over the ensuing nine months, Nielsen estimates the overall FMCG industry will grow at about 5%. However, rural is expected to expand more, reversing the trend of the past two years when slowing demand in the hinterland had dragged the entire market down.
“With the migrant population moving back and the government stimulus being announced in rural areas, with MSP going up, absolute MGNREGA outlay going up from Rs 185 to Rs 210, all these go in favour of rural demand and consumption picking up. While it will be more for staples, even for a portfolio like toothpaste, etc, the impact should definitely be there,” Dabur CEO Mohit Malthora said.