Sun Oct 06 22:33:53 UTC 2024: ## Rural Revival Fuels FMCG Growth as Urban Market Slows

**New Delhi, India:** Fast-moving consumer goods (FMCG) companies in India are reporting strong rural sales momentum for the third consecutive quarter, with expectations of continued growth in the July-September period. This comes as demand conditions improve in the hinterland, driven by declining inflation and recovering rural incomes.

According to industry experts, rural volume growth is expected to reach 6% in the September quarter, significantly outpacing the projected 2% growth in urban areas. This disparity is attributed to a high base effect in urban markets and a surge in rural disposable income as commodity prices moderate.

“The rural revival is getting better, and rural volume growth will continue to be ahead of urban volume growth in the September quarter,” said Mohit Malhotra, CEO of Dabur India, a company with nearly 50% of its sales coming from rural areas.

Procter & Gamble India’s MD & CEO V Kumar echoed this sentiment, highlighting positive consumption trends in the domestic FMCG market. “The strong momentum has prompted the company to double down on India,” Kumar added.

While the rural economy continues to strengthen, companies are also preparing for potential inflationary pressures. Hindustan Unilever (HUL), the country’s largest FMCG company, expects value growth to improve from the December quarter as price hikes are implemented, particularly in packaged foods and kitchen staples.

“Tea has turned inflationary this year, and we may take calibrated price hikes if this trend continues,” said Ritesh Tiwari, CFO of HUL. “The second area where we are seeing sequential inflation building up recently is crude palm oil, a key ingredient in soaps, hair care, and some skin care products.”

Edible oil companies have already implemented price hikes in the range of 5-10%, which are expected to boost value growth, though volume growth may taper off in the coming months.

The FMCG sector’s strong performance comes amidst a broader market downturn, with the Nifty index experiencing a 4.45% decline due to foreign institutional investor (FII) selling in favor of Chinese stocks. While the Nifty enjoyed a strong start to the year, the recent shift in FII sentiment has contributed to a decline.

Despite the broader market fluctuations, the FMCG sector remains optimistic about the continued rural revival and its potential to drive growth in the coming quarters.

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