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FMCG firms expect double-digit rural growth in December quarter, Retail News, ET Retail

New Delhi: Fast-moving consumer goods companies expect to record a healthy double-digit growth across rural markets in the December quarter on the back of festive season-driven consumption and softening of commodity prices, shared industry experts.

Rural markets have been witnessing a slowdown in demand over the past three quarters due to steep inflation.

“With price reduction across the oil table combined with good monsoons in most parts of the country, we are anticipating double-digit volume growth in the next quarter across rural markets”, said Mukesh Kumar Mishra, VP, sales and marketing, Adani Wilmar. He further added that the festive season will also play its role, in terms of boosting the demand in rural markets.

Sharing his thoughts, Manish Aggarwal, director, Bikano, Bikanervala Foods said that the company’s year-on-year growth is 18 per cent and for this festive season the retailer is targeting to touch the Rs 400 crore figure.

Ashish Khandelwal, MD of FMCG firm BL Agro, for which 40 – 45 per cent of consumption comes from rural markets, said that though its key markets, Bihar and Eastern Uttar Pradesh are slow, they are moving ahead and are demanding.

Commenting on festive season demand, he said, “there’s going to be an increase, but not a phenomenal one.” Khandelwal shared that he expects a slight 5 to 10 per cent increase in the demand during the festive season either from rural or urban consumption.

Amarnath Halember, executive director and CEO, NextG Apex India said that the value growth is projected to be much higher than volume growth due to price hikes and inflation. He shared that estimated volume growth is around 2.5 to 5 per cent; however, value growth could actually touch up to 9 to 11 per cent.

Highlighting the factors supporting FMCG growth in rural areas, Vinay Shrivastava, Head – FMCG Business at B2B e-commerce platform, Udaan said that the consumer’s propensity to buy during the festive period coupled with rising disposable income due to normal monsoon and better farm incomes augur well for the FMCG business.

Sharing outlook on growth, he said, “From a B2B ecommerce perspective we see tremendous growth both in value as well as volume.”

When asked about the factors affecting FMCG growth, Aggarwal from Bikano said that distribution channels, limited awareness about the product, brand value, and increasing disposable income, are the key factors impacting consumer goods demand.

Adding to the list, Halember from NextG Apex India said that the demand for small-size or low-unit packs along with the high cost of logistics is impacting the growth of FMCG in rural markets.

“It will be a costly affair for any mid- and small-size FMCG brand to be able to afford to spend more on logistics to cater to the demand across rural markets,” he opined.

Desmond D’souza, senior director- sales at Mondelez India said that like its peers, Mondelez India is also affected by inflation. He shared that the company’s strategy to tackle inflation has been to maintain a well-balanced portfolio led by consumption-led profitable growth.

Adani Wilmar’s Mishra commented that while the edible oil prices have reduced, some of the categories like branded staples have seen a high price increase in the last two quarters, leading to a more pronounced impact in rural markets.

Anuj Sethi, senior director, CRISIL Ratings had told ETRetail earlier that FMCG companies’ margins which witnessed some moderation in the first half of this fiscal, will see some recovery with only limited price cuts being implemented, as not all input prices have cooled.

While commodity prices such as edible oil and sugar are cooling off; milk and wheat are witnessing an increase in prices.

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