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Rural India moves over packaged food, demand slows down in FMCG sector

Rural India is moving away from packaged food category.

Rural India is spending less on packaged food category items such as biscuits, confectionaries, spices etc, resulting in a considerable slowdown in FMCG sector growth in general, a report says. Adding to the woes of the FMCG sector is an increase in pricing with inflation accelerating from 2% in Jan 2019 to 2.9% in March 2019, the report added.

In a major reversal in the growth trends witnessed in rural, urban areas, Q12019 has witnessed “a significant softening of growth trends in Rural which is dampening the overall FMCG industry growth from Q3’18 to Q1’19,” Nielsen said in its recent report. This comes as a surprise since “rural has grown 3-5% points faster than urban,” the report added.

Particularly, the drop in demand side from the rural sector has been registered in essentials (such as packaged atta, refined oils, spices) and impulse (chocolates, biscuits, confectionaries etc.) food categories. The changes have been null in the lifestyle food category which includes items such as breakfast cereals, cheese etc. Also, compared to large manufacturers, small manufacturers are more affected by this. The situation is severe in rural areas for the small manufacturers, Nielsen report said.

India’s FMCG sector has reported a drop of 2.3 percentage points from the last quarter of 2018. While the industry slated a growth of 13.6% in Q12019, the same was 15.9% in Q42018.

Nevertheless, not every FMCG player is distressed by the rural growth slow down or inflation. While the Indian FMCG sector has reported a growth drop, there are foreign FMCG giants who have registered higher growth due to the same. Recently, global FMCG giants Nestle SA and Unilever Limited declared their first quarter results and said that prices were increased due to which their sales have gone up. “Unilever said sales were boosted by price increases, some of which were enacted to offset rising commodity costs tied to raw materials in food and petrochemicals used in detergents,” Bloomberg reported.

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Source: Financial Express