Normal rains to lift rural demand for FMCG firms

If monsoon rains turn out as predicted and raw material prices continue to cool, rural demand for fast-moving consumer goods could recover in the next three to six months, companies and industry experts said.

- Suneera Tandon

Earlier this month, India Meteorological Department (IMD), the official weather forecaster, said it expects normal rains in the June-September monsoon, despite the likelihood of El Nino conditions-a phenomenon usually associated with droughts-appearing by July. The forecast could spell good news for rural India, as nearly half of India's kharif crop area lacking assured irrigation depends on monsoon rains, Mint reported earlier.

The prediction seems to be of a good and normal monsoon, which should support an early recovery of rural demand, said K. Ramakrishnan, managing director of South Asia at the Worldpanel division of Kantar, which tracks household FMCG consumption across India.

Rural consumption declined for the sixth consecutive quarter in the December quarter, while urban markets showed positive momentum, according to data by market researcher NielsenIQ. Rural volumes declined 2.8% year-on-year in the December quarter, the researcher said. Data for the March quarter is yet to be released.

Several companies Mint spoke to said demand for nondiscretionary items in rural markets improved during the March quarter, while that for discretionary products such as personal care remained tepid.