Moderation in inflationary pressures has led to some improvement in terms of rural volume growth in the June quarter for the FMCG sector. Players expect to see gradual recovery in rural demand trends in the coming quarters. However, companies said the impact of erratic weather patterns on agri-incomes and El Nino will need to be closely monitored.
Mohit Malhotra,CEO, Dabur India said that the FMCG industry witnessed a volume growth of four per cent in the rural regions in the June quarter. ”With the inflation softening, we have seen our rural growths bounce back to high single digits after three quarters. Rural growth for us was at eight per cent and urban growth was at 10 per cent in Q1. We believe rural growth will keep inching up and the gap between rural growth and urban growth for the industry will keep narrowing,” he stated on an earnings call.
The management of Hindustan Unilever in the recent earnings call stated that while rural volume growth has turned positive in June quarter 2023, seeing sequential improvements, it has come on the back of a volume decline in June quarter 2022. “Overall, with inflation moderating benefits of lower input costs were passed on to consumers through pricing actions taken in the quarter. The government has maintained its heightened amount of rural expenditure. That supports the overall situation of income levels in rural areas,” the company’s leadership stated.
The company added that increase in government’s capex investments augurs well for non-farm incomes in rural areas. But it added that the impact of monsoon and weather-related risks remain as key monitorables.
However, Marico said it has not yet seen green shoots in terms of rural demand. ”Volume growth for the FMCG sector was in the positive territory for the second consecutive quarter, led by steady growth in urban, however, evident green shoots in rural were not yet visible. Factors such as retail inflation dropping to sub- five per cent levels, late pickup in monsoons, hike in kharif crop MSPs and higher government spending continue to give hopes of a gradual recovery in rural sentiment,” said Saugata Gupta, MD& CEO, Marico Ltd on a recent earnings calls.
He added that the extent of impact of “spatial distribution of rainfall and erratic weather patterns on rural farm incomes” will need to be seen in the near term.