The FMCG sector experienced a boost in rural volume growth during the June quarter due to a reduction in inflationary pressures. As a result, players in the industry are optimistic about witnessing a gradual recovery in rural demand trends in the upcoming quarters. Nonetheless, companies are cautious and acknowledge the importance of closely monitoring the impact of erratic weather patterns on agricultural incomes and the potential influence of El Nino on the sector.
According to Dabur India’s CEO, Mohit Malhotra, the FMCG industry experienced a four percent increase in volume growth in rural regions during the June quarter.
“With the inflation softening, we have seen our rural growths bounce back to high single digits after three quarters. Rural growth for us was at eight per cent and urban growth was at 10 per cent in Q1. We believe rural growth will keep inching up and the gap between rural growth and urban growth for the industry will keep narrowing,” he stated on an earnings call.
During the recent earnings call, the management of Hindustan Unilever reported that rural volume growth turned positive in the June quarter of 2023, showing sequential improvements. However, they highlighted that this growth followed a volume decline experienced in the June quarter of 2022.
“Overall, with inflation moderating benefits of lower input costs were passed on to consumers through pricing actions taken in the quarter. The government has maintained its heightened amount of rural expenditure. That supports the overall situation of income levels in rural areas,” the company’s leadership stated.
The company also mentioned that the rise in government’s capex investments bodes well for non-farm incomes in rural areas. However, they emphasized the importance of closely monitoring the impact of the monsoon and weather-related risks as significant factors going forward.
Marico, on the other hand, stated that it has not yet observed any signs of recovery in terms of rural demand.
”Volume growth for the FMCG sector was in the positive territory for the second consecutive quarter, led by steady growth in urban, however, evident green shoots in rural were not yet visible. Factors such as retail inflation dropping to sub- five per cent levels, late pickup in monsoons, hike in kharif crop MSPs and higher government spending continue to give hopes of a gradual recovery in rural sentiment,” said Saugata Gupta, MD& CEO, Marico Ltd on a recent earnings calls.
He added that the extent of impact of “spatial distribution of rainfall and erratic weather patterns on rural farm incomes” will need to be seen in the near term.