FMCG Sector to Grow with Rural Demand Recovery and Favorable Global Factors
The FMCG sector in India is expected to see growth due to favorable global factors and a revival in rural demand, according to a report by Centrum Institutional Research. The report highlights a downward trend in rural inflation, rising real wages, and an above-normal monsoon as key drivers. While food companies are set to perform well, the home and personal care segment may grow more slowly.
The rural market, which makes up 52% of the sector’s volume, is beginning to recover after challenges from the COVID-19 pandemic and inflation. The report noted that between FY04 and FY24, rural volumes grew at a compound annual growth rate (CAGR) of 3.4%, outpacing urban areas, which grew at a CAGR of 2.8%. As the rural economy picks up, staple companies are likely to focus on driving top-line growth through increased volume.
Additionally, many emerging FMCG categories still have lower penetration in rural areas, offering significant potential for growth. With the positive momentum in the rural market, major players can capitalize on this opportunity by expanding their distribution networks and increasing direct reach.
“The FMCG sector has checked low single-digit volume growth over the past two decades, which is primarily driven by 2.3% population growth, though additional growth has come from increased penetration. While past growth has been driven by penetration and distribution expansion, this decade may should pivot towards premiumisation and innovation,” said the report.
Doubts Revealed
FMCG Sector -: FMCG stands for Fast-Moving Consumer Goods. These are products that sell quickly and are used by people every day, like soap, toothpaste, and snacks.
Rural Demand Recovery -: Rural demand recovery means that people living in villages and small towns are starting to buy more things again after a period when they were buying less.
Favorable Global Factors -: Favorable global factors are positive changes happening around the world that help businesses in India, like lower prices for raw materials or better trade conditions.
Centrum Institutional Research -: Centrum Institutional Research is a company that studies and gives advice about the economy and businesses. They make reports to help people understand market trends.
Rural Inflation -: Rural inflation is the increase in prices of goods and services in villages and small towns. A downward trend means these prices are not rising as fast as before.
Real Wages -: Real wages are the amount of money people earn after considering the effect of inflation. If real wages are rising, it means people can buy more with the money they earn.
Above-Normal Monsoon -: An above-normal monsoon means that there has been more rainfall than usual. Good rainfall helps farmers grow more crops, which can boost the rural economy.
Home and Personal Care Segment -: The home and personal care segment includes products like cleaning supplies, shampoos, and lotions. These are items people use to take care of their homes and themselves.
COVID-19 Pandemic -: The COVID-19 pandemic is a global outbreak of a virus that started in 2019. It caused many people to get sick and affected economies around the world.
