Thursday, 11 Sep, 2025
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The divergence between volume and value growth signals a tentative recovery rather than a strong rebound. Consumers are gravitating toward smaller pack sizes and essentials, sidelining discretionary spending.
The fast-moving consumer goods (FMCG) sector is undergoing a quiet transformation. While rural India continues to do much of the heavy lifting, the strength of that support is no longer guaranteed. In the first quarter of FY2025, rural demand expanded by 8.4 per cent—over three times the pace of urban areas, where growth slowed to just 2.6 per cent. Yet despite the headline 11 per cent industry growth, the story beneath the surface is far less uniform.
Volume growth (5.1 per cent) and price increases (5.6 per cent) contributed almost equally to the sector’s performance. But the rise in smaller, low-unit pack purchases—as noted by NielsenIQ—points to a cautious consumer mindset, shaped by inflation fatigue and limited discretionary power. Rural resilience remains a key driver, but even that narrative is beginning to shift.
Fresh data from Kantar Worldpanel complicates the picture further: rural demand slowed to just 2.7 per cent in the March quarter, down from 6.3 per cent a year earlier. Urban growth held at 4.4 per cent, nearly flat year-on-year. The implication: India’s hinterland may not be the unshakable growth engine it once was.
“The sector is flashing mixed signals,” says Roosevelt Dsouza of NielsenIQ. “Volume growth is tapering off across categories, though non-food items are still expanding faster than food. Inflation is easing, but high edible oil prices continue to weigh on household staples.”
That pressure is clearest in food categories. Growth in food consumption fell to 4.9 per cent in the March quarter from 6 per cent previously, dragged down by staples like edible and palm oils. In contrast, home and personal care products saw stronger growth of 5.7 per cent, especially in rural markets.
Even as traditional kirana stores remain resilient—with sales rising 6.2 per cent year-on-year in the March quarter—modern trade continues to slip, down 3.3 per cent. Meanwhile, e-commerce is gaining traction in eight major metros, driven by more frequent online purchases and larger basket sizes. This shift is beginning to reshape urban retail dynamics.
Consumer goods companies are responding by sharpening their focus on affordable SKUs and rural-centric strategies. Godrej Consumer Products CEO Sudhir Sitapati recently noted he expects urban demand to take 12 to 18 months to recover—a lag that’s pushing firms further into the countryside. But that pivot comes with its own set of risks: a cooling rural engine, a highly price-sensitive shopper, and an uncertain economic backdrop.
Smaller players are gaining market share, thanks to a low base and agility. But whether they can sustain this momentum remains an open question. The monsoon forecast and revised tax slabs could offer short-term tailwinds, yet companies face a deeper challenge—how to convert fragmented, price-led gains into durable, volume-driven growth.
India’s FMCG sector is not in crisis—but it is at an inflection point. The next phase of growth will depend on how well firms navigate a consumer landscape that’s more digital, more cautious, and more fragmented than ever before.
Worth mentioning here is that the divergence between volume and value growth signals a fragile recovery, not a full-blown rebound. With consumers opting for smaller packs and essentials over discretionary items, the FMCG sector is riding on cautious optimism. Unless wage growth and job creation pick up meaningfully, especially in urban India, companies may struggle to convert temporary resilience into sustained demand.
