The FMCG industry is witnessing signs of revival in rural areas, which have been under pressure in recent quarters.
With commodity price pressures easing, FMCG majors such as HUL, Godrej Consumer Products Ltd (GCPL), Dabur, Marico and Emami expect a gradual recovery in consumption going forward and are increasing upfront marketing investments in advertising and promotion (A&P), PTI reported.
In Q3 FY23, FMCG makers reported growth in urban markets along with modern trade channels and e-commerce. But FMCG sales from traditional trade channels such as kirana stores were flat, the report said.
Rural markets, which contribute around 35 percent of FMCG industry sales, were still sluggish in Q3. However, the companies said they are witnessing signs of improvement on the back of encouraging winter crop sowing, indications of higher farm income, and continued government stimulus, the report added.
FMCG major Dabur said the impact of inflationary pressures was more pronounced in rural markets as marked downtrading and a shift to more affordable and smaller packs resulted in rural growth lagging urban markets for the second quarter in a row, as per the report.
Marico said that prominent green shoots in rural are eagerly awaited as an encouraging winter crop-sowing season, indications of higher farm income, and continued government stimulus bode well. "We expect to maintain an improving growth trend in the quarters ahead," it said.
Similarly, Godrej Consumer Products stated that with commodity pressures abating, it expects a gradual recovery in consumption, expansion in gross margins, upfront marketing investments with a significant focus on reducing controllable costs, and an improvement in profitability in the coming quarters.
According to Emami, during the third quarter, demand patterns for the FMCG sector remained sluggish, with rural markets experiencing continued pressure.
"Further, a warmer winter season across the country impacted sales even more," it said.
Leading FMCG firm Hindustan Unilever (HUL) said it is "cautiously optimistic" in the near term and believes that the worst of inflation is behind us.
"We stay confident of the medium- to the long-term potential of the Indian FMCG sector and HUL’s ability to deliver consistent, competitive, profitable, and responsible growth," HUL CEO and Managing Director Sanjiv Mehta was quoted as saying in the report.
According to the company, the rural market has shown some signs of improvement, with the expansion in the December quarter higher than the growth in the September quarter and the last 12 months.
Meanwhile, ITC said economic activity in India continued to gather momentum with sequential moderation in commodity inflation, even as core inflation remained elevated, as per the report.
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