December quarter data hints at a FMCG recovery in urban markets: Report

December quarter data hints at a potential FMCG recovery in urban markets

India’s fast-moving consumer goods (FMCG) sector, particularly in urban markets, is showing signs of a turnaround, the Economic Times has reported.

In the December quarter, urban demand for daily groceries and essentials grew by 5.3 percent year-on-year, improving from the 4.3 percent in the previous quarter, the report said, citing data from global research firm Kantar.

Rural markets saw a 3.9 percent increase in sales volume, maintaining the same growth rate as the previous quarter.

Overall, FMCG volumes rose by 4.6 percent in the December quarter, up from 4.1 percent in the previous quarter, it said.

Kantar’s data includes both branded and unorganised products, covering unpackaged commodities and actual household consumption by volume.

"With the tax benefits provided in the Budget affecting the urban consumer, we do see some short-term consumption impetus, which is expected to further consolidate urban's position this year," the report quoted K Ramakrishnan, managing director for South Asia at Kantar's Worldpanel division, as saying.

He, however, cautioned that while urban markets are showing promise, it is too early to declare a full-fledged recovery.

Moneycontrol couldn’t verify the report independently.

The report said urban markets may lead the FMCG sector’s growth in 2025, especially as rural areas lack strong growth drivers. Despite the positive trends, market recovery remains uncertain and will require close monitoring of future consumption patterns.

For most companies, urban markets contribute between 50 percent and 70 percent of overall sales. However, inflationary pressures, low wage growth, and rising housing costs have weighed on urban demand for daily groceries and staples over the past year, the report said.

While companies such as Hindustan Unilever, Godrej and Marico have said urban market growth lagged rural areas, Kantar's data shows a different trend.

According to the report, unbranded products in cities grew at a significantly faster rate of 8.6 percent compared to rural growth of just 1.6 percent. This indicates that much of the urban slowdown was driven by branded products sold by listed firms, as consumers opted for lower-priced alternatives amid inflationary pressures.