Fast-moving consumer goods (FMCG) companies are hopeful of rural consumption improving in the coming quarters on the back of softening commodity prices, normal monsoons, and government measures. Rural volumes have largely been muted so far because of inflationary pressures impacting consumption in the regions. Commodities will have the most impact on rural volumes, according to Ritesh Tiwari, CFO of Hindustan Unilever (HUL), in a post-July-September earnings conference call.
“If the price of the larger basket of commodities falls, as it did for vegetable oil, that will boost consumption and volume. The monsoons have been normal, but it’s too soon to tell how crop realization will work out, and other government measures like fertilizer subsidies will determine rural consumption, according to Tiwari. These macro factors include improving urban employment, which will send money back to rural areas, and normal monsoon conditions.
HUL MD According to Sanjiv Mehta, urban growth has significantly surpassed rural growth on a moving annual total (MAT) basis. He continued, “Rural volumes will depend on commodity prices, crop realization, and government actions going forward.” However, rural headline growth is now thought to be increasing. According to data from NielsenIQ India, urban markets recovered in the June quarter with positive volume growth of 0.6%, while rural markets recovered more slowly, with a quarterly decline of -2.4%.
The impact of inflationary pressures was more noticeable in rural markets during the September quarter, according to Dabur India, with hinterland demand growth behind urban markets for the first time in five quarters. The business, however, is optimistic that rural demand would show a smart comeback in the upcoming quarters.
