Consumer goods companies have revised their initial projections, now anticipating a recovery in demand only during the first quarter of FY25. This marks a shift from their earlier forecasts, which indicated a stable demand scenario by the second half of the current fiscal year.

“Large organized players have been squeezed a bit from both ends- regional and unbranded players in rural and D2C and new age players at the premium end. We feel that the market will definitely start showing good volume growth by the next two quarters, fueled by rural recovery and pricing action by the large players which has already taken place. The economy is stable and inflation is getting under control,” said Saugata Gupta, managing director at Marico.

Over the past two years, most consumer goods companies began raising prices by over a quarter to counter the escalating costs associated with factors such as raw materials, supply chain, and energy. The inflation in costs started with the pandemic but was exacerbated by Russia’s invasion of Ukraine.

In fact, prices for household care products, as well as food and beverages, have more than doubled in the past ten years, according to Boston Consulting Group.

“There price hike was steeper post Covid. There is an increased need to focus on supply side actions to regain consumer share of wallet,” said Abheek Singhi, MD and senior partner at BCG at the CII National FMCG Summit.

Over the past year, a discernible decline in rural volume has been observed, attributed to inflation and unpredictable monsoons. Despite urban incomes proving more resilient and driving overall growth, companies anticipate a recovery in rural volume with the advent of a favorable monsoon, typically resulting in increased sales after a quarter lag.

“While green shoots of recovery are visible, rural demand is still trailing urban markets. We are still seeing liquidity issues in rural areas, despite the festive season kicking in. That said, we are hopeful of rural markets posting a strong recovery. We are already seeing the gap between rural and urban growth continuously shrinking,” said Mohit Malhotra, chief executive officer at Dabur.

In the June-September 2023 quarter, year-on-year data from Kantar indicates that the expansion of Fast-Moving Consumer Goods (FMCG) sales in rural areas was approximately 6%, whereas urban sales volume experienced an 8% growth.

“This is an indication that things are improving, more gradually for large listed companies but in terms of the overall market which also has smaller, local and unbranded players, there is a clear growth,” said K Ramakrishnan, managing director, South Asia, Worldpanel division, Kantar.

The year-on-year FMCG volume growth for the September quarter stood at 7.2%. Companies emphasized the need to assess growth through a category lens rather than considering the entire market.

“While there is a demand stress in the market, several of our categories are growing. There are green-shoots in some parts of the market but we expect it will take a quarter or two for things to improve,” said Sudhir Sitapati, managing director at Godrej Consumer Products.