Rural consumption grows double than urban market in Sep qtr: NielsenIQ

New Delhi: Urban and rural markets have shown a sequential recovery in consumer demand and rural areas continue to surpass urban areas in volume growth across most regions of India, according to a report from data analytics firm NielsenIQ.

According to the latest NielsenIQ's FMCG Quarterly snapshot, the Indian FMCG (fast-moving consumer goods) industry witnessed a 5.7 per cent value-based growth and 4.1 per cent volume growth on a 1.5 per cent price growth in the July-September quarter.

"Urban consumption growth in Q3 24 was 2.8 per cent, while rural growth increased to 6 per cent from 5.2 per cent in the previous quarter, 2X faster growth than Urban,” the report said.

Small and medium FMCG companies had a rebound after facing a decline in some quarters. They had faster growth helped by the food segment in comparison to large FMCG giants in terms of value and volume.

In the September quarter results leading FMCG companies including HUL, Nestle, Dabur, and Tata Consumer Products have reported a softness in the demand from the urban market, mainly on account of high food inflation.

According to industry observers, the urban market contributes to around 62 to 65 per cent of FMCG sales and the rest is from the rural market, which is largely dominated by food products and small offerings.

Moreover, in the September quarter, the FMCG industry also had "slight improvement" on the volume front sequentially, the report said.

"Food consumption growth increased to 3.4 per cent in Q3’24 compared to 2.1 per cent in Q2’24," it said.

This uptick in volume growth is largely attributed to staple categories as edible oils, packaged atta, and spices despite price growth.

"In HPC (Home & Personal Care) categories, the consumption growth stabilized at 6 per cent in Q3’24 compared to Q2’23 at 6.7 per cent," it added.

This stabilisation in consumer demand for HPC categories, which includes categories such as skin cleansers, shampoo, body lotion, shower gel, toothpaste, laundry detergents etc, was observed in both urban and rural markets.

Moreover, large companies in the FMCG segment continue to demonstrate stronger performance compared to small, mid players, and giants.

Small manufacturers recovered from the consumption decline of the last three quarters and grew faster than big companies, helped by a sharp recovery in volume growth in Food for small players.