Volume growth during the quarter was up 7.5% year-on-year, the highest in the last eight quarters. Meanwhile, rural markets, hurting from sluggish growth earlier, too turned positive, reporting a 4% volume growth in the June quarter; rural markets had reported a volume growth of 0.3% in the March quarter.

“June quarter, thus far, is the best quarter in a year and half, with positive strides across all growth vectors we track. Recovery in rural markets which was in negative territory for last few quarters, is primarily driven by non-foods. This combined with over 21% growth in modern trade augurs well for the upcoming festive seasons,” said Roosevelt D’Souza, lead, Customer Success, NIQ India.

Passing on benefits of lowered commodity prices will lift consumption benefitting manufacturers, retailers and consumers, he added.

Volumes in urban markets doubled sequentially—growing 10.2% in the June quarter, the researcher said in its note. To be sure, NielsenIQ follows a calendar year.

Growth in volumes comes after companies went easy on price hikes and took small steps to pass on benefits of cooling commodities to end consumers.

Drop in price growth driven by the foods categories had a positive impact on consumers and is anticipated to be mirrored in the build up to the festival season, said Satish Pillai, MD, NIQ India.

Meanwhile, sales of packaged foods drove growth for the sector with more households buying branded staples and impulse foods such as chips and namkeens. Food volumes grew at the rate of 8.5% in the June quarter compared to a year ago period.

“Staple and impulse categories drive the overall growth in the category, and consumers are leaning back towards habit forming categories in cities and metros. Within non-food categories there is also an improvement to 5.4% in the June quarter versus a year ago. This improvement can be attributed to a revival in rural consumption growth, through home care categories while personal care categories continue to see a decline in rural,” NIQ said.

In an interview with Mint earlier this week, PepsiCo India, the maker of Lay’s chips and Pepsi beverages, said rural markets were beginning to show signs of recovery. “Recently yes, there was a slowdown in rural, but we have started seeing very positive signs of recovery as we speak,” said Ahmed ElSheikh, president, PepsiCo India. Rural demand is recovering for both the foods and beverages categories for the company. ElSheikh said improved infrastructure and connectivity is also helping Pepsi grow its business.

Interestingly, local players are making a strong comeback driving up demand for packaged goods—especially in rural markets.

“At an overall FMCG level, small manufacturers are driving the value and volume growth. This is led by rural, while in urban, volume growth is at par for large and small, NiIQ said.

“Small manufacturers are witnessing growth ahead of large players in non-food categories while large players are driving the consumption growth in foods,” it said.

NIQ’s data corroborates with commentary shared by large consumer goods makers such as Hindustan Unilever Limited (HUL) and Britannia Industries that said local players were resurfacing in the market with greater intensity.

In its June quarter earnings calls, HUL’s top management said that smaller players were growing ahead of the large players in categories such as tea and laundry.

Updated: 10 Aug 2023, 11:18 PM IST