“There are green shoots which we see in the rural areas. Products from our rural portfolio and low unit price packs have clocked positive volume growth. We feel the traction in rural areas is coming back,” said Rohit Jawa, MD and CEO of HUL, while announcing the company’s Q1 results.
Earlier this month, Sudhir Sitapati, MD and CEO, Godrej Consumer Products (GCPL), echoed the same sentiment. Talking to ET on the sidelines of an event, he said the company expects a recovery in rural markets during the second half of the year after good monsoons and government measures.
…over the past two to three years, I have not been very sure, but I think by Diwali we will get to see some good rural recovery, he said.
The southwest monsoon covered the entire country on July 2, six days ahead of schedule, according to the Indian Meteorological Department. For an agriculture-dependent economy, the southwest monsoon winds that provide 75% of the annual rainfall are considered the lifeline. This season, the state-run weather forecaster has predicted an “above-normal” monsoon. Normal or slightly above-average rainfall usually results in higher farmer income, more employment for farm laborers, food inflation under control, and a rise in rural consumption.
The Budget announced on July 23 placed massive bets on ways of improving rural consumption. It laid down plans such as ₹2.66 lakh crore for rural development and ₹1.52 lakh crore for agriculture and allied sectors.
According to Aditya Jhaver, Director, CRISIL Ratings, expectations of a better monsoon this fiscal year will support higher farm output. Along with a higher minimum support price announced for key crops and ongoing infrastructure development activity in rural areas, this is bound to support rural incomes to continuous improvement in rural demand for FMCG products.
“There was a mild recovery in rural demand in the last quarter of fiscal 2024, driven by moderating inflationary pressures and increasing average non-agri rural wages, among others,” he adds.
With rural consumption likely to pick up, FMCG players are readying plans to increase their advertisement spends in rural areas. Consumption is likely to get a further boost with the onset of the festive season next month, beginning with Raksha Bandhan.
According to the dentsu report, in 2023, FMCG contributed Rs. 31,428 crore to total AdEx. The FMCG industry derives 35% of its sales from rural India.
Weakness in rural market growth continued for most of fiscal 2024 at the back of uneven rains and high food inflation. It started showing signs of recovery in Q4 2024 as rural demand for FMCG products outpaced urban demand.
“We expect 6-7% volume growth in rural consumers in fiscal 2025, helped by expectations of a better monsoon benefiting agricultural production and a hike in minimum support price supporting farm incomes. Higher government spending toward rural infrastructure, mainly through the Pradhan Mantri Awaas Yojana-Grameen for affordable houses, will aid higher savings in rural India, thereby supporting their ability to spend more,” adds Jhaveri.
According to Krishnarao Buddha, senior category head of Parle Products, demand is likely to be boosted for the FMCG company from the July to September quarter.
“We would look at increasing our advertisement spends by at least 10-15% for the July-September quarter over the preceding one. Our ad visibility from late March through the end of June was pretty strong on Marquee sporting events such as IPL and the T20 World Cup. With these events now behind us, we’re shifting our focus to regular media channels,” he says.
The monsoon is a peak season for advertising edible oil, spices, and other ingredients. The consumption of edible oil goes up during the monsoon since people stay more at home, which obviously would translate to more cooking at home. In addition, doctors often advise against eating out during the monsoon.
According to Kiran Giradkar, group CMO, BN Group, its brand ‘Healthy Value’, aimed at rural, has seen traction as the monsoon set in. “Monsoon is a critical period as it meets all rural household needs, particularly in the kitchen area,” he says.
Giradkar explained that monsoon is the time of hope in agricultural households and hence an ideal time for advertising.
“The rural households expect a good year, leading to increased consumption during this time, unlike in summer. The positive outlook from a good monsoon encourages higher spending,” he explains.
Shaileen Patel, general manager for business development and marketing communication, NK Proteins, Tirupati Edible Oils, said with the monsoon progressing, it is expected to further drive demand in the rural sector.
“Overall consumption has been subdued, and rural growth hasn’t come up to expectations, but we are hopeful of a revival from next month. We will marginally increase our ad spends in Q2, but there will be a huge jump in Q3 and Q4,” he says.
Aasif Malbari, chief financial officer at Godrej Consumer Products, said that favorable rainfall expected now bodes well for boosting rural demand.
“With the FMCG industry still adjusting to changing market dynamics, a normal monsoon can bring in some hope. An improving set of macro-indicators and strong agricultural output growth will help lift consumer sentiments. Sectors like personal wash and home care would be potential beneficiaries,” he says.
