Unseasonal rains have dampened consumer demand, but rural growth provides positive outlook for FMCG sector: Report

New Delhi [India], June 3 : The Indian FMCG sector is facing mixed conditions, with unseasonal rains posing a challenge to the sales of summer-centric products, while rural markets outdid urban for the fourth straight quarter, a report said on Tuesday.

According to the report by Anand Rathi Research, the unseasonal rainfall in April and May has dampened consumer demand for items like soft drinks, ice creams, prickly heat talc, and skincare products. Weather disruption has affected sales of items whose demand fluctuates with seasons but the report says that impact may be limited.

Most FMCG companies remain optimistic about a rebound in demand. The expectation is that rural markets, which have shown strong growth, could be further bolstered by a normal monsoon season, offsetting some of the losses in summer product sales.

The report also emphasizes that the FMCG sector is demonstrating resilience. While the unseasonal rains have posed a challenge, the sector's overall outlook remains largely positive. This optimism stems from several factors, primarily the continued strength of rural markets.

Rural market outperformed urban market for the fourth consecutive quarter, with rural volume growth at a rate of 8.4%, which was nearly 4 times of the urban growth.

"Most companies are seeing stronger rural traction, while urban demand is muted, but gradual recovery is expected in coming quarters," the report said.

This rural strength is expected to continue, particularly with the anticipation of a normal monsoon season, which is crucial for agricultural output and rural incomes. A favourable monsoon would further fuel consumer spending in rural areas, potentially offsetting some of the losses incurred in the summer product segment due to the unseasonal rains.

FMCG companies are banking on a gradual recovery in urban demand. While currently lagging behind rural markets, urban centers are expected to regain momentum in the coming quarters, contributing to a more balanced growth trajectory for the sector. Companies are also adapting to evolving consumer behaviour, with e-commerce and quick commerce channels playing an increasingly important role in FMCG sales.

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