Rural-Urban Consumption Gap Finally Beginning To Narrow, Says NielsenIQ
Volume grew 6.4% in the October–December period in comparison with a growth of 8.6% in the previous quarter.
![<div class="paragraphs"><p>A store in New Delhi (Source: NDTV Profit)</p></div>](https://media.assettype.com/bloombergquint%2F2024-02%2F868979d1-b3e0-4d30-8dcc-e3c6e2068a0d%2FIMG_20211229_141025.jpg?auto=format%2Ccompress&w=200)
The fast-moving consumer goods industry has seen a sequential decline in volume growth in the quarter-ended December, even as rural regions bridged the gap with the thriving urban markets, Nielsen Consumer LLC said on Tuesday.
Volume grew 6.4% in the October–December period in comparison with a growth of 8.6% in the previous quarter, according to the latest findings released by the market researcher.
The rural markets grew 5.8% in the third quarter, catching up with the urban region, which rose by a moderate 6.8%. It was driven by habit-forming food categories like biscuits, noodles and essential home products, NielsenIQ said.
"These categories [habit-forming] have thrived despite flat to negative price growth, indicating resilience and sustained demand," Roosevelt Dsouza, head of customer success at NielsenIQ India, said.
"For the first time in 2023, consumption gaps between urban and rural markets are narrowing down," Dsouza said, highlighting that the northern and western parts of the country are contributing to this phenomenon.
NielsenIQ expects the FMCG sector to grow 4.5–6.5% in 2024, with the Union government's measures to support the rural economy auguring well for companies that have a significant presence in rural areas. At 4.5%, this would translate to less than half the 9.3% growth rate achieved in 2023.
Makers of soap-to-staples grappled with weak sales in the hinterlands as people pulled back on spending amid price pressure. Most companies that have released their quarterly earnings so far have reported low single-digit volume growth in the December quarter. However, Dabur India Ltd. is the only company to highlight that growth in rural areas outpaced that in urban pockets.
Volume in the food sector grew 5.3% over the year-ago period but slowed from 8.7% in the July–September quarter, led by staples like refined and non-refined edible oils and impulse categories like confectionery.
The non-food categories showed an improvement, registering volume growth of 9.6% as compared with last year. It also increased sequentially from 8.7% growth. NielsenIQ attributes this improvement to higher rural consumption, which grew 9.8% in the December quarter versus 6.7% in the September quarter. Detergent cakes and bars, washing powder and personal care are among the categories driving demand in rural areas.
However, the non-food sector is witnessing slower consumption growth in urban markets. It grew 9.4% in the festive quarter, slightly down sequentially from 10.4%.
In value terms, the FMCG industry experienced growth of 6% in the third quarter, according to NielsenIQ. More units were purchased in the food categories as compared with the same period last year. In non-food, more large packs were bought.
Channel-wise, modern trade continues to experience double-digit consumption growth at 16.8%. Traditional trade has experienced a drop, with consumption growth slowing to 5.3% in the December quarter from 7.5% in the preceding quarter, according to the data.
The research firm said smaller manufacturers are recording higher volume growth rates for non-food categories as compared with their larger counterparts, while the food categories exhibit a reverse trend.