FMCG sector shows signs of recovery in December 2024 quarter, report reveals

INDIA – The fast-moving consumer goods (FMCG) sector is witnessing early signs of a turnaround in urban markets, driven by a 5.3% increase in demand for daily groceries and essentials, according to global research firm Kantar.   

Rural markets, however, remained unchanged from the previous quarter, with a 3.9% annual sales volume growth. 

Overall, FMCG volumes increased by 4.6% in December, reflecting an uptick in consumer purchases.   

K Ramakrishnan, Managing Director, South Asia, Worldpanel division at Kantar, highlighted the impact of budget tax benefits on urban consumers, providing a short-term boost to consumption.  

However, he cautioned that a full-fledged market recovery is yet to be confirmed, particularly as rural markets lack a similar push.   

Despite this, urban growth appears poised to outpace rural demand for most of 2024.   

Sectoral growth trends   

The food and beverage segment saw a 4.3% increase, down from 6.7% a year ago, largely due to a decline in atta (flour) sales and a slowdown in snacking categories.   

During Nestlé India’s earnings call, Chairman and Managing Director Suresh Narayanan acknowledged the shifting dynamics, “Urban growth has tapered, while rural demand is improving. However, overall growth concerns persist, and we are not completely out of the woods yet.” 

Most FMCG companies’ sales come from urban markets, which account for 50% to 70% of their total sales. Over the past year, however, inflation, low wage growth, and rising housing costs have impacted urban demand for groceries and staples. 

While major FMCG players, including Hindustan Unilever, Godrej, and Marico, reported weaker urban growth, Kantar’s data revealed an 8.6% rise in unbranded product sales in cities, compared to 1.6% growth in rural areas. 

This trend indicates that the urban slowdown primarily affected branded FMCG products, as consumers opted for lower-priced alternatives amid inflationary pressures. 

Sudhir Sitapati, Managing Director at Godrej Consumer Products, noted shifting consumer preferences, “We are seeing signs of downtrading, particularly in categories like household insecticides. Urban consumption trends need close monitoring, and we must adapt accordingly.” 

As 2024 progresses, urban recovery will depend on consumer confidence, inflation trends, and economic policy measures, while rural markets will require additional stimulus to sustain growth. 

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