The Indian FMCG industry's volume grew by 6.4 per cent year-on-year in the October-December quarter with an uptick in consumption that was seen both in urban and rural areas, according to a report by analytics firm NielsenIQ.
The report also highlighted a narrowing consumption gap between urban and rural markets for the first time in 2023.
Higher volume and a recovery in rural markets helped the FMCG industry log a 6 per cent growth in value terms, the report stated.
In 2024, the Indian fast-moving consumer goods (FMCG) industry is poised to register a growth between 4.5 per cent and 6.5 per cent, on the basis of the strength of the sector and the Indian economy, it said.
However, sequentially, the volume growth declined in the October-December quarter from the previous September quarter due to moderation in consumption within the FMCG sector.
"In rural markets, there is a sequential slowdown in volume growth, with consumption experiencing a slight decline during this quarter (Q4'23) compared to Q3'23. However, the decline is more pronounced in urban markets," NielsenIQ (NIQ) India FMCG Quarterly Snapshot said.
In the December quarter, the FMCG industry had a consumption uptick of 6.8 per cent year-on-year in the urban market and 5.8 per cent in the rural market, which was lagging for several quarters.
"For the first time in 2023, consumption gaps between urban and rural markets are narrowing down. The North and West regions are contributing to this phenomenon," Roosevelt Dsouza, NIQ Head of Customer Success - India, said.
Despite a sequential-quarter decline, the rural recovery narrative continued to evolve throughout the year.
"In Q4 2023, we observe an uptick in consumption, primarily driven by habit-forming categories (such as biscuits and noodles) in food and essential home products. These categories have thrived despite flat to negative price growth, indicating resilience and sustained demand," she added.
Within the retail sector, FMCG sales from modern trade channels continue to experience double-digit consumption growth at 16.8 per cent in the fourth quarter, the report said.
On the other hand, sales from traditional trade "experienced a decrease" with consumption growth slowing down to 5.3 per cent in Q4 2023, from 7.5 per cent in the preceding quarter (Q3 2023).
The report further said that average pack sizes in urban markets continue to remain 'positive', although there is a persistent preference for larger packs.
"In rural areas, there is a recovery path, with a growing preference for larger packs," it added.
On the consumption pattern, the report said in Q4 2023, food categories performed better compared to the year-ago period, whereas in non-food categories, more large packs were bought.
"The volume growth in the food sector was at a rate of 5.3 per cent compared to the same period last year, down from 8.7 per cent in Q3 2023," it said.
This slowdown in growth is primarily due to products falling under staples (such as refined and non-refined edible oils, etc.) and Impulse (such as confectionery, etc.) categories.
"In the non-food categories, there is an improvement, with volume growth reaching 9.6 per cent in Q4'23 compared to the last year, an increase from the 8.7 per cent recorded in Q3'23. This improvement can be attributed to an increase in rural consumption growth," it said.
Volume growth is attributed to home care (detergent cakes and bars, washing powder) and personal care (toilet soaps) categories in rural areas.
In urban areas, the non-food sector is witnessing slower consumption growth, with a growth rate of 9.4 per cent in the December quarter.