The southern region of India seems to be leading the way in the overall economic recovery post-Covid, with five states showing stronger sales in both discretionary and fast-moving consumer goods (FMCG) compared to other parts of the country.
According to the latest report from Kantar, a global consumer research firm, individuals in the southern region topped the charts in FMCG expenditure, with an average increase of INR 2,261 per person in 2023 compared to 2022. The report also noted a significant surge in total shopping trips in 2023 compared to the previous year, witnessing a remarkable 185% rise in FMCG pack purchases.
The data pertains to Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, and Telangana.
The report noted that this rise in purchases indicates a boost in purchasing ability and consumer trust in the area, stimulating demand across a range of FMCG categories.
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Companies have indicated that demand has seen an upswing across the entire nation since January-March. The Retailers’ Association of India (RAI) highlighted that growth rates in the western and northern regions matched those of the peninsula only in April, with the south emerging as India’s top-performing region over the past 12-15 months.
RAI monitors retail-level sales growth across various categories on a monthly basis. In April, retailers in the southern region experienced a 5% year-on-year expansion in sales, surpassing the 4% growth rate seen pan-India. According to RAI data, in December, there was a 7% growth in the south compared to the 4% growth rate observed nationwide.
Kumar Rajagopalan, the CEO of RAI, highlighted that the peninsular region is witnessing superior growth even in discretionary categories, attributed to a significantly larger younger demographic and elevated disposable incomes. He added that FMCG growth is anticipated to excel due to double the rate of supermarket penetration compared to other regions, guaranteeing greater shelf space for all categories of new products.
The acceleration of the southern recovery, according to chief executives, can be attributed to the notable concentration of new-age sectors like startups and tech companies. These sectors employ a young workforce capable of comfortably affording increased discretionary spending, thus contributing to the region’s swifter economic rebound.
Manufacturing investment has remained strong, and states like Kerala have witnessed a resurgence in remittances from overseas following the pandemic.
Saugata Gupta, the chief executive of Marico, suggested that the southern region might be experiencing faster expansion due to its higher concentration of urban centers. He noted that the growth rate in the FMCG industry has been driven by urban markets for five consecutive quarters until the last calendar year, with rural growth surpassing urban growth only in the January to March period.
He mentioned that this year, the other regions will catch up in line with the rural recovery.
During earnings calls earlier this month, companies like Dabur and Adani Wilmar informed analysts that the southern market is a key focus for them. ITC is currently testing the majority of its new packaged food product launches in that region, while Hindustan Unilever mentioned in a recent earnings call that it is conducting a pilot for Boost Ready to Drink there.
Earlier, Mohit Malhotra, the chief executive of Dabur India, highlighted that per capita income is increasing at a faster pace in the southern region. He noted that there is a preference for more functional products among consumers in the south, contributing to enhanced growth.
Shrikant Kanhere, the chief financial officer of Adani Wilmar, the country’s largest edible oil company, also emphasized that the southern market is highly lucrative. He mentioned that the company is rolling out market-specific campaigns tailored to the region.
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In FY24, Karnataka recorded the highest annual average withdrawal of INR 1.83 crore per cash-dispensing machine, as per CMS Info Systems.
CMS, which serves every second ATM and every third organized retail outlet in India for cash management, released its latest consumption report last month.
The report noted that Karnataka and Tamil Nadu were among the top five consumption hotspots in India last fiscal year, alongside Delhi, Uttar Pradesh, and West Bengal.