Rural revival's delay and demand issues Put an end to consumer goods' rebound aspirations

 Rural revival's delay and demand issues Put an end to consumer goods' rebound aspirations

Rural revival's delay and demand issues Put an end to consumer goods' rebound aspirations

FMCG corporations are concerned about improving rural areas. Rural demand is increasing again, although it is doing so more slowly than urban demand.

In Q3FY24, Nuvama anticipates that United Breweries and Nestle India would post significant volume and revenue growth figures.

Due to lower-than-expected demand over the holiday season, consumer goods sales and rural demand remained poor in Q3FY24. According to Nuvama Institutional Equities, the volume weakness and demand issues might become worse during the January–March quarter as well, lowering expectations for a consumer goods industry rebound.

Experts and consumer products businesses anticipated an improvement in demand during the October–December quarter, but this did not transpire.

The brokerage company said, "We estimate volume growth for most players will keep being challenging in Q3FY24 maybe even additionally in Q4FY24, while moderating diesel as well as fertilizer cost inflation bodes well for the rural sector." This is because to the lack of rainfall, which has affected rural expansion, and the lower than anticipated demand for winter and festivals.

Nonetheless, the brokerage company anticipates that in Q3FY24, United Breweries and Nestle India would record significant volume and revenue increases.

This year, volume growth has proven to be problematic for FMCG firms. This is because lower raw material costs resulted from low inflation, which opened the door for more local and small businesses to join the market. These local and smaller competitors pose a threat to well-known FMCG brands. High input costs cause local firms to pull out of the market during times of high inflation, whereas branded FMCG companies recover market share since they can maintain their profit margins by not raising prices.

For FMCG firms, improving rural areas is another area of importance. The demand in rural areas is increasing, albeit at a slower rate than in metropolitan areas.

There is an increase in direct access.

Businesses are working harder to expand direct distribution in rural regions as the recession drags on. According to Nuwama, this would hopefully assist them in overcoming the difficulties caused by the weak demand in rural areas, which is made worse by the constrained wholesale trade channel as a result of the liquidity crisis.

Lower consumer sales have resulted in distributors giving grocery retailers less credit, which has delayed payments from stores to distributors and limited the amount of new loans that can be obtained. Grocery businesses are unable to maintain enough inventory due to the credit constraint, which is causing a vicious loop, according to the brokerage company.

Throughout the July–September quarter, sales in rural areas continued to fall. However, because of the second quarter's meager rainfall and increased food costs, difficulties persisted.

In November, sales in rural regions had a 9.6% year-over-year (YoY) fall, which was much greater than the 3.5 percent decline seen in urban areas. Orders at kirana shops, which account for 85% of FMCG sales, decreased by 7.5 percent on an annual basis, according to Bizom statistics. Because of the extra pre-Diwali inventory that was unsold owing to low demand, this was further enhanced.

The previous two months saw an improvement in the sales of FMCG firms. September saw a 3.2% year-over-year increase in urban FMCG sales and a 5.8% increase in rural India sales. The data from Bizom shows that in October, sales decreased by 2.2% in cities and 6.1% in rural areas.