Amidst slowdown, noodle and biscuit sales see an uptick in rural areas

• Consumption gaps between urban and rural markets narrowed down in the December quarter, for the first time in 2023.
• Modern trade saw double-digit growth in consumption, but growth in traditional trade slipped sequentially.
• Non-food category volumes grew sequentially but that of food slowed down, led by staples and impulse categories.
  

Even as FMCG sales growth has been moderating on a sequential basis, sales of noodles and biscuits saw an uptick in the rural markets in the December quarter, says a NielsenIQ report.

Rural markets too saw a sequential-quarterly decline, but consumption gaps between urban and rural markets narrowed down for the first time in 2023, in the December quarter. The North and West regions contributed to this phenomenon, the report says.

“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,” said Roosevelt Dsouza, Head of Customer Success – India, NIQ.

The rural areas are also seeing a growing preference for larger packs, while urban markets see a persistent preference for larger packs, the report said. It says that the FMCG industry experienced a 6% growth in value, attributed to a 6.4% increase in volume. However, on a sequential basis, there is a moderation in consumption growth, it adds.

The pricing growth in the overall fell to 2.7% in Q3, due to the price cuts taken across categories by FMCG majors to fight off competition. In the December quarter of last year, it was 10%, as per Nielsen data.

FMCG major HUL said that in Q3, its volumes grew 2% in Q3, but its value growth fell marginally by 0.3%. Marico’s domestic volumes grew 2% during the quarter, with a flat value growth.

Kirana continue to suffer

Modern trade which consists of supermarkets, hypermarkets and such has seen a double-digit growth in consumption at 16.8%. Traditional Trade which consists of kiranas or mom-and-pop stores saw a 5.3% growth in consumption, falling from 7.5% in the Q2 of FY24.

“Despite certain challenges, the positive momentum in modern trade adds a promising dimension to the overall market scenario,” Nielsen says.

Non-food categories grow faster

The volume growth in general is also much faster for non-food categories. Though more units were purchased in food categories compared to the same period last year, non-foods saw more large packs being purchased.

The volume growth in the food sector was at 5.3% YoY, but it was at 8.7% in Q2 of FY23. This slowdown in growth is primarily due to staples (such as refined and non-refined edible oils, etc.) and impulse categories such as confectionery.

In non-food categories, volumes grew at 9.6% in Q3 FY24 — higher than the 8.7% recorded in Q2. This improvement can be attributed to an increase in rural consumption growth, with a growth rate of 9.8% (vs. 6.7% in Q2), Nielsen says.

“Volume growth is attributed to home care products like detergent cakes and bars, washing powder; and personal care like toilet soaps categories in rural areas,” the report said. In urban areas, the non-food sector is witnessing slower consumption growth, with a growth rate of 9.4% in Q3, slightly down from 10.4% in Q2.