Rural beats Urban in household consumption

Household consumption of FMCG products in villages grows at almost double the pace of urban areas in 2015, show IMRB data
Rural beats Urban in household consumption

Household consumption of fast-moving consumer goods (FMCG) in rural areas grew at almost double the pace of urban areas in 2015, showing all wasn’t lost in the countryside in a year dominated by slowdown.

In 2015, FMCG products’ household consumption in rural India grew at 5.4 per cent over the previous year, according to data shared by market research agency IMRB. During the same period, urban household FMCG consumption grew at only 2.9 per cent year-on-year.

Also, rural household consumption in 2015 grew at the fastest pace in the past three years (see chart). This, experts say, shows that if the right product is available at the right price and in the right pack size, rural consumers are not averse to buying it.

"If you look at rural (household consumption) over a three-year period, it moved from negative growth in 2013 and 2014 (-0.1 per cent and -3.2 respectively), to positive territory in 2015. This is because the second and third quarters (of 2015) saw a lot of optimism in rural consumers, pertaining to a good monsoon and harvest. That sentiment came down in the fourth quarter because the monsoons hadn’t delivered as per the expectations. It was weak," said K Ramakrishnan, general manager & country head – household panel, IMRB Kantar World Panel.
A recent ICRA report on the Index of Industrial Production (IIP), which is considered an indirect indicator of consumer demand, says the consumer non-durables segment has been weak over the past few months. It also suggests a favourable monsoon could reverse this trend.

The report said, following two consecutive sub-par monsoons in 2014 and 2015, the initial forecast of the Met department has estimated the monsoon rainfall in 2016 to be above-normal at 106 per cent of the long period average (LPA).

This supports our expectation of an impending cyclical upturn in agricultural output and rural demand during FY2017, which should help arrest the sustained contraction in consumer non-durables recorded in eight of the first 11 months of FY2016, it added.

Nielsen, in a recent report, noted that while FMCG has generally displayed resilience during slowdown, companies would have to improve marketing and distribution to ride through the tough times. "Our recent statistical modelling and analysis has shown that about 55 per cent of FMCG sales are influenced by marketing factors and the rest by macro-economic factors. This is noteworthy, as it clearly indicates that even in cases of a lackluster prognosis of the economy, there is still a strong chance for driving growth for FMCG brands," Nielsen said.

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