“The situation is returning to normalcy. The September quarter is expected to be marginally better primarily due to signs of inflation stabilizing. However, monsoon has been below average in Bihar, Uttar Pradesh, and West Bengal and this could hurt demand in the areas," Neeraj Khatri, chief executive, consumer care, India and SAARC Business, Wipro Consumer Care, said. Demand for small packs is higher in rural areas than urban, he added.
Demand for FMCG products in rural areas was lower than urban areas even in the June quarter with volumes dipping 2.4%, researcher Nielsen IQ had said last month.
Wipro is optimistic that the festivals may boost rural consumption. “Inflation is stabilizing. Concerns will remain till we see a further drop in inflation and uptick in demand in HY2," Khatri said.
Parle Products, however, expects demand in rural areas to see similar growth as urban in the July-September quarter. “However, inflation did have some impact to slightly taper off rural demand," Krishnarao Buddha, senior category head, Parle Products, said.
Research firm Kantar said rural households continued to buy smaller product packs.
Even during this inflationary environment, rural areas have been driving household consumption in FMCG, said K. Ramakrishnan, managing director, South Asia, Worldpanel Division, Kantar.“However, the longer the prices stay high, the more difficult it will get for rural households to stay positive. Like the rest of India, rural has cut-down on spending per trip by moving to small packs and unbranded products. The trend persists and we expect this to only continue for the reminder of the year."
Some others said rural markets reported mixed demand trends over the last two quarters depending on the states. This could improve going into the festive season next month.“Growth may not be like last year, especially, in rural markets. On the back of pent up demand, last year’s growth was 25-30%. We will grow but may not be able to maintain the same growth trajectory," said Ajay Sharma, senior vice president and head of rural division, at appliances firm Usha International, which sells fans and kitchen appliances.
Edelweiss analysts were also not upbeat about a rural recovery. “We have not picked up a significant sign of an uptick in rural FMCG demand. Though, monsoon has been quite good, but headline data hides the deficit in 3-4 high population states," they said in a report.
