Fast-moving consumer goods (FMCG) sales in rural areas witnessed a sequential recovery in the latter half of December, according to data by retail intelligence firm Bizom.
Also, demand witnessed in the previous month compared to November was higher from tier-3 cities than mega cities.
Overall demand from rural areas declined 0.2 per cent on a month-on-month basis in December while it was down 17 per cent in November, according to Bizom’s data.
In December, the overall demand was up 1.4 per cent on a month-on-month basis and monthly stockings at kiranas were also up 3.3 per cent.
This came even as active kirana outlets were down 1.8 per cent.
“The rural segment is also almost on a growth path as we're seeing stocks get liquidated post Diwali.
"More importantly, inflation is heading south and if that continues, it could spur strong consumption in rural areas too,” said Akshay D’Souza, chief of growth and insights at Bizom.
He added that demand for branded commodities and home care products have been steady as we enter the winter season.
It is driven by strong stocking at kiranas, especially during the last week of the month.
FMCG companies also agreed that they witnessed some green shoots in rural demand in the last 15-20 days of December.
“The first 15 days of December were slow, but we have witnessed a pick-up in consumption in the last 15 days,” said Angshu Mallick, chief executive officer (CEO) of Adani Wilmar.
He added that farmers are now getting money in their hands.
Also, the upcoming wedding season in January has led to improved demand as caterers (part of institutional sales) have also started to order.
He expects the January-March quarter to see better demand.
Parle Products, which was not really impacted by weak rural demand, has also seen higher rural growth in the last one month.
“Rural demand was growing in the range of 3-4 per cent and is now in the range of 5-6 per cent during last month,” Mayank Shah, senior category head at Parle Products, said.
Even non-food demand witnessed an uptick, but it is still not to the extent expected despite winter setting in.
CavinKare, a south-based FMCG major, has seen demand improve a bit in rural areas in the last one week.
“There has been a slight pick-up in rural demand but not to the extent we expected in personal care.
"Demand should see momentum in the January-March quarter,” said Venkatesh Vijayaraghavan, CEO at CavinKare.
Vijayaraghavan added that once the cash cycle kicks in — as farmers start to get money from their harvest — demand will also pick up. This is especially true in the March quarter.
In Bizom’s data for the first 20 days of the month, demand was still negative on a month-on-month basis and compared to last year as well.
Demand was down 8.1 per cent in the first 20 days of December compared to November.
On a year-on-year (YoY) basis, demand fell 9.4 per cent.
Demand for namkeens (salty snacks) witnessed an uptick in rural areas during the last 15 days, said Chandu Virani, founder of Balaji Wafers.
However, D’Souza said the challenge of yet another wave of Covid looms.
“If the previous wave is any indication, FMCG businesses have found a way to work through this crisis.
"They will ensure steady production and distribution of stocks to kiranas,” D’Souza said.
He added, “With inflation lowering and businesses looking to drive consumption, we can definitely hope to see more value offerings for consumers.”