(Reuters) – Solid demand in rural areas, as well as higher prices of staples including edible oil and wheat flour, helped the consumer goods sector report a 10.6% sales growth in the December quarter, market researcher NielsenIQ said on Thursday.
India’s rural areas – which account for just over a third of consumer goods sales – have proven a bright spot for an industry struggling with an inflation-led spending slowdown in large cities.
“Rural markets (continued) to lead the charge, outpacing urban consumption (during the December quarter),” Roosevelt Dsouza, head of customer success for consumer goods at NielsenIQ, said in a statement.
Sales volume jumped 9.9% in rural areas in the December quarter, up from 5.7% in the previous quarter – double the 5% increase in urban centers, NielsenIQ said. But it added urban pockets also improved from the September quarter’s 2.6% growth.
Rural areas have outperformed urban locations for the last four quarters, benefiting from income support schemes rolled out by several Indian states, while slowing salary increases in cities have squeezed consumer spending.
In the October-December quarter, overall volume rose by 7.1% – the highest in over a year – driven by demand for laundry products and edible oil, even as prices rose by 3.3%, according to NielsenIQ.
Dabur India and Hindustan Unilever reported a higher December-quarter profit on recovering rural demand.
However, large consumer goods makers, with topline exceeding 50 billion rupees ($571.2 million) are also facing stiff competition from smaller rivals, whose sales increased roughly twice as fast during the festive quarter, NielsenIQ said.
Consumer goods makers have also raised product prices to counter price increases in commodities such as copra and cocoa, with cooking oil maker Adani Wilmar and Hindustan Unilever warning of further hikes.
Indians also preferred smaller product packs during the quarter, NielsenIQ said, echoing comments from Hindustan Unilever.
($1 = 87.5400 Indian rupees)
(Reporting by Praveen Paramasivam in Chennai; Editing by Eileen Soreng)
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