Rural markets are projected to clock about 6.1 per cent volume growth in the FMCG sector outpacing urban growth in FY25, according to Kantar. This projection excludes wheat and atta segments and comes after nearly two years of sluggish rural consumption trends. At the same time urban volume growth is expected to remain flat during the 12-month period ending March, 2025 at 4.2 per cent.

Rural volume growth for the year ago period was pegged at 4.4 per cent, while urban growth at 4.2 per cent. More than half of the FMCG sector’s volumes were contributed by rural households in the 12 month period ended April. Besides inflationary pressures, decline in rural household size, higher spends on utilities such as electricity and petrol as well as higher focus on savings are among the factors that have led to stagnation in rural consumption in the FMCG sector in the past few years.

K Ramakrishnan, Managing Director – South Asia, Kantar Worldpanel, told businessline that challenges of Covid and inflation hit rural areas after a lag compared to urban regions. “Hence from the recovery perspective also rural has taken time to bounce back. Now, we expect rural to outpace urban growth. The volume growth projection takes into account various macro-economic factors such as normal monsoon, good harvest, MSPs and non-farm income. Rural market is going to see a seismic shift once there is stability in the macroeconomic environment.”

He added that rural households are also increasingly spending on aspirational categories which sometimes comes at an expense of mass categories. Kantar’s analysis pointed out that rural households’ spending on mass categories such as salt, detergents, hair oil and coffee has come down in the past few years. At the same time, their spending has been increasing on categories such as toilet cleaners, floor cleaners, bottled soft drinks and insecticides. For instance : Toilet cleaner household penetration has grown to 43.8 per cent, while insecticides has grown to 70.4 per cent

Premiumisation

At the same time, premiumisation trends in the country have been gaining ground. “There is a gradual but eventual shift in from the traditional, savings-oriented consumer behaviour to one that actively seeks several products, services and experiences,” said Ramakrishnan. 

Kantar estimates that premium categories targeted at SEC A consumers have been growing at an average CAGR of 16 per cent in terms of volumes and 24 per cent in value in the past three years.

Hair serums and leave-on conditioners grew 1.4 times while muesli and granola have grown 1.5 times in terms of volumes during MAT April ‘2024 vs 2022. Similarly frozen foods saw 30 per cent value growth, while fabric conditioners grew 2x.

Categories that help save time, offer convenience and elevate consumer experiences are driving the growth of premiumisation. In the personal care segment, consumers are willing to shell more for products that cater to specific needs such as anti-ageing creams and sensitivity toothpastes. Similarly in food, healthier alternatives such as healthy biscuits and dark chocolates are witnessing strong traction, the insights firm noted.

Quick-commerce

Quick-commerce has become a key channel in fuelling the growth of the premiumisation trend in the top nine metros. Household penetration growth of premium products on quick-commerce platforms in categories such as floor cleaners (72 per cent), breakfast cereals (79 per cent) and washing liquids ( 135 per cent) was higher than mass priced products in the 12 months period ended April over the corresponding period. Consumers are also seen buying larger packs on q-commerce in categories such as washing liquid, dishwashing liquid, healthy biscuits handwash, breakfast cereals and floor cleaners, according to Kantar’s analysis.

“Household penetration growth of quick commerce channel was up 31 per cent (MAT April 24 vs 23) in the top nine metros, outpacing while e-commerce channel (19 per cent),” said Ramakrishnan. 

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