Rural engine starting to fire for FMCG, aids growth in Q1

MUMBAI: Rural demand which has been showing signs of revival has sustained through the June quarter, boding well for fast moving consumer goods companies.
In their updates for Q1FY25, Dabur, Marico and Adani Wilmar hinted at improving volume growth, helped by demand recovery.
Rural demand, which had been lagging for several quarters, on the back of patchy monsoon rains in key agricultural regions picked up pace in the March quarter, surpassing urban demand for the first time in at least two years, estimates released by NielsenIQ showed.
Analysts expect the trend to have sustained through Q1. Rural consumption is moderate at the moment but the monsoons will give it a fillip; also what is helping is aggressive expansion of rural distribution by players like Nestle and Dabur, widening coverage of villages, said Akshay D'souza, chief of growth and insights at retail intelligence platform Bizom.

Dabur expects its India business to record a mid-single digit volume growth. "The quarter saw sequential improvement in demand trends with rural growth picking up. With forecast of a normal monsoon and continued focus by govt on macro-economic growth, we expect the improvement to accelerate in the coming months," the company said.
Marico said that the domestic business posted a "modest" uptick in underlying volume growth on a sequential basis in the June quarter despite the value added hair oils category getting impacted due to "competitive headwinds" in the bottom-of-the-pyramid segment.
The maker of Parachute Coconut Oil and Saffola Oats said that demand trends continued to exhibit gradual improvement and the firm's consolidated revenue growth is expected to trend upwards during the year on the back of an improving trajectory in domestic volume growth and higher realisations due to the favourable pricing cycle in key domestic portfolios.
Parle Products expects strong growth coming in from rural regions this fiscal year. "Since Jan-Feb, which also coincided with good harvest of rabi crop, we have seen a revival in rural demand. Good monsoons will only help in sustaining the demand momentum," said Mayank Shah, vice-president at Parle Products. "
Adani Wilmar is eyeing 13% year-on-year volume growth in Q1FY25. The firm hopes to maintain its string growth rate in FY25 helped by revival in rural consumption and robust urban demand, it said in its annual report.
"Adequate rainfall is crucial for agriculture, the backbone of rural livelihoods and can significantly boost crop production leading to increased income for farmers and overall rural prosperity. However, regional variations in rainfall could affect crop yields," said Varun Berry, MD and vice-chairman at Britannia Industries. Crisil estimates the FMCG sector to see a revenue growth of 7-9% in FY25 against 5-7% growth in FY24, helped in parts by revival of rural demand.