How weak demand in rural India is affecting FMCG sales

FMCG majors like Godrej Consumer, Hindustan Unilever, ITC, Parle, Britannia, Nestle, Dabur and Marico may have to contend with a demand slowdown from rural India.

Weak demand in India’s hinterland has affected sales of fast-moving consumer goods (FMCG) in September as compared to August, which saw heavy stocking ahead of the festival season, according to a Business Standard report.

Citing retail intelligence platform Bizom, the report said that sales in rural India fell 14.3% while urban sales growth stood at 1.1% in September as compared to the previous month.

What more does the data say?

The numbers say that overall, sales of FMCG products fell by 9.6% in September as compared to August.

But why is this fall significant?

Rural sales form 65-70% of FMCG sales, according to Bizom. It pointed out rural sales were affected owing to excessive rain in some areas and weak precipitation in others, thereby hitting farm yields and household incomes.

What has the report said about stockists and retailers?

Kirana stocking across both urban and rural remains cautious given that the consumer inflation worries haven’t completely eased off, according to the report. Also, kirana owners are looking to restock only after liquidation of the stock built up in August.

Category-wise, how did the sales decline?

Among categories, on a month-on-month basis, commodity products (wheat, rice, edible oil, etc) posted the highest decline in sales —14.5% — followed by home care products, which were down 8.6%.

Personal care was an exception with flat sales as compared to the previous month.

On a year-on-year basis, FMCG sales were up 8.1% in September, while for the July-September quarter the increase was 12.3%, according to Bizom’s data. In August, both rural and urban markets had witnessed growth. Rural areas grew 6.7% and urban ones 5.5% on a month-on-month basis, which sent overall sales up 6.3%, the Business Standard report noted.