Normal rains will boost rural demand for FMCG companies

Earlier this month, the India Meteorological Department (IMD), the official weather forecaster, said it expected normal rainfall in the June-September monsoon, despite the possibility of El Nino – a phenomenon usually associated with drought. Is – visible till July. The forecast could bring good news for rural India, as almost half of India’s kharif crop area that depends on monsoon rains lacks assured irrigation, Mint reported earlier.

Managing Director, South Asia, Kantar’s WorldPanel Division, K. Ramakrishnan said the forecast appears to be of a good and normal monsoon, which could support an early recovery in rural demand.

According to data from market researcher NielsenIQ, rural consumption declined for the sixth consecutive quarter in the December quarter, while urban markets showed positive momentum. The researcher said rural volumes declined by 2.8% year-on-year in the December quarter. The figures for the March quarter are yet to be released.

Several companies Mint spoke to said demand for non-discretionary items improved in rural markets during the March quarter, while demand for discretionary products such as personal care remained sluggish. “While beverage companies are reporting an uptick in rural demand, we are yet to see that in personal care. Last quarter was good; Now, based on the monsoon reports and softening of commodities, we feel the next few quarters will be good for discretionary as well.”

Urban markets are still growing fast and outpacing rural areas, Nandi said, adding rural demand will bounce back in the next two quarters. “Rural is growing, but the recovery in discretionary or personal care is not as strong. Over the next two quarters, rural will catch up with moderation in food prices, moderation in raw material inflation, as well as a normal monsoon,” Nandy said.

Overall, consumer demand and sentiment remained subdued during the March quarter. “Demand for staples in rural areas remained weak and failed to show any improvement; Urban sectors remained stable during the quarter,” Amnish Agarwal, head of research at Prabhudas Lilladher Pvt Ltd, said in a note dated April 11.

Others said the normal weather forecast eased the worries of the agriculture sector. “The rainfall forecast this year has been termed as ‘normal’ with 96% of the long period average, which means it will not negatively impact the yield of crops sown in the Kharif season. This also means that the FMCG sector will also be majorly unaffected. For example, we rely heavily on potato and pulses yields for the chips and namkeen categories, respectively. So, at the time of its harvesting, if El Nino conditions favor it, it will not be adversely affected,” said Manish Agarwal, director of Bikano, Bikanerwala Foods Pvt Ltd.

Aggarwal said that inflation remains a constant threat to the FMCG industry. “However, we expect this to be more than offset by strong demand from consumers, resulting in profitable results,” he added.

India’s annual retail inflation for March fell below the central bank’s upper tolerance level for the first time this year and eased to 5.66% from 6.44% in February. Food inflation, which accounts for nearly half of the overall consumer price basket, eased to 4.79% on lower prices of vegetables.

Retail intelligence platform Bijom said that food inflation is set to ease worldwide in the current financial year. This may help lift demand in general. Akshay D’Souza, head of growth and insights at Bijom, said, “Moreover, in India, with the competitive landscape intensifying for FMCG, we expect to see a drop in prices across categories, which will definitely boost consumption.” I can help.”

“A normal monsoon would be a boon for the country, especially for the rural markets. “We are already seeing green shoots from both the hinterlands as well as their urban counterparts,” said Krishnarao Budha, senior category head, Parle Products, a packaged food company.