Rural India a 'bright star' for FMCG sales; will continue to outpace urban expansion in Q2 of 2024: Kantar

Rural India remains a "bright star" for the growth of fast-moving consumer goods sales and the region is expected to maintain better pace of expansion than urban areas in the second quarter of 2024, a report said on Friday.

According to a report from data, insights and consulting firm Kantar, rural India will maintain "better growth levels" racing ahead of the urban markets for FMCG (fast-moving consumer goods) companies in the second quarter (April-June) of 2024.

Terming the rural market as a "bright star", the report said it had a "resurgence" in 2024. While urban is likely to remain under stress, the rural may consolidate its position in second quarter of the year, it said.

This growth in the rural areas is helped by region-centric measures by the government in the interim budget earlier this year, which provided stability.

Moreover, populist measures are expected by some states which are going to face elections this year, said Kantar FMCG pulse report for Q2.

"We should also bear in mind that more states are heading for polls in the coming months and the second half should only see a rise in populist measures for the rural market. After COVID-19, the rural market was in distress and faced degrowth in the past successive quarters.

"However, the start to 2024 from a rural perspective has been brilliant, with rural growth overtaking urban's; and the rural worm is looking upward," it said.

About the urban market, the report said, it did not see growth for three straight quarters, and is contending with a huge Q2 2023 base.

"Therefore, Urban is likely to remain under stress, while Rural may consolidate its position in Q2," it said, adding that falling Urban curve coupled with a strong base is likely to constrict the numbers for the next quarters.

According to Kantar Worldpanel Managing Director – South Asia K Ramakrishnan, for the most part of 2023, Urban has maintained strong growth numbers.

"Rapid growth is unsustainable for a long term, and necessarily Urban is hitting brakes now. This has also coincided with typically Urban-centric categories such as noodles and salty snacks slowing down in growth within Urban, after continuously galloping since the pandemic," he said.

The rural market may also get a boost from the rabi crop, the report said, though it was unclear about its status.

"Central India, where the bulk of the rural populous resides, received excess rainfall in the year. South India, a prominent rice and spice producer, has received below-par rainfall till now. There are reports that rabi harvests are likely to be hit this year," it said.

The effect of rainfall will be felt towards the second half more, but "certain rural markets could turn on the caution switch already", the report said.

"Even with that, we do expect Rural to maintain better growth levels compared to Urban for the remainder of the year," it added.

Normally, rural area contributes around 35 to 37 per cent of the FMCG sales, and value offerings in the food segment dominates.

The report also highlighted that though inflation might have slowed down to acceptable levels, its effects are not lost on the consumer.

"The Indian rural market is full of potential. Yes, inflation has dampened the mood of the rural shopper for a time, but the trends are now pointing up. Rural has outpaced Urban this quarter, and is likely to hold at that level for some time in the near future," said Ramakrishnan.