FMCG sales surge: Rural demand, lower inflation, and festivities drive growth

Consumer goods firms are enjoying significantly higher sales growth this quarter than July-September 2023, buoyed by a normal monsoon, lower inflation and strong festive stocking, which indicates a reversal in the recent slowdown, industry executives said. Leading fast-moving consumer goods (FMCG) companies including Procter & Gamble, Parle Products and Amul confirmed a revival in value and volume sales amid a pick-up in rural demand. Some analysts, though, said volume sales may be hit in coming months by an imminent price hike in several categories due to higher import duties on crude and refined edible oils.

"There are definitely green shoots that we see closer home to the FMCG industry," said Mrinalini Srinivasan, chief financial officer of P&G Hygiene and Health Care.

"Inflation has been consistently softening, with July and August closing below the RBI medium-term target of 4%; monsoon across 75% of the districts has been either normal or above normal; and rural demand is expected to keep up with these positive trends," said Srinivasan of P&G Hygiene at a recent investor call.


The overall FMCG market is expected to expand 12% by value in July-September, compared to a year ago, when it had fallen 2.3% amid rising food inflation and an erratic monsoon, according to Bizom, which tracks kirana sales.

Sales were up 13% on-year in August and 8% in July, Bizom data showed. The June quarter had seen 9% sales growth on-year, while the March quarter growth was 7%, reflecting a sequential improvement too.

"When the monsoons are good, it reflects in the farming sector, which does well - as pricing and procurement are better, and there is more money in the hands of the rural consumer," said Jayen Mehta, managing director of Gujarat Cooperative Milk Marketing Federation, India's largest dairy that makes Amul cheese, milk, butter and ice-cream. "This is leading to positive sentiment uptick."

"We expect demand momentum across all dairy categories on account of multiple factors, including distribution push and good monsoons (that) have, in fact, been extended in some areas," Mehta said.

Stable So Far

There has been a demand crunch in the price-sensitive consumer industry after companies raised sticker prices by almost a quarter two years after Covid to offset higher input costs. However, they started slashing prices about a year ago amid visible consumer preference for cheaper products, which impacted their value growth.

Prices have been stable over the past few months, with some companies even hiking prices as sales improved.

"Both value and volume sales have come back," said Krishnarao Buddha, senior category head at Parle Products, India's biggest food company. "There is a normalisation effect now, with the end of post-Covid issues. A host of factors - from good monsoon, strong stocking as we enter the festive season and rural recovery - has led to both good value as well as volume offtake during the current quarter."