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Urban India spurs FMCG growth

News, 10 February 2015

MUMBAI: Household FMCG consumption in urban areas of India surpassed rural India in both volume and value terms last year, although rural areas still delivered better results in certain categories, nationwide research has found.

According to data collected from 79,400 Indian households by research firm IMRB, FMCG consumption volume in urban areas grew 4% across all categories in 2014 while it declined 3% in rural areas.

Urban India also recorded 6% FMCG growth in value terms, compared with 3% growth in rural areas. This was a respectable improvement on the 2% growth urban India recorded in 2013, Business Standard reported.

"Urban growth has certainly been better than rural in 2014, in volumes as well as value," said Varun Sinha, group business director at IMRB Kantar Worldwide.

"But the picture seems to change a little if you do a category-wise analysis," he added. "Personal care, for instance, has done better in rural India, while food has done better in urban parts."

Personal care grew 5% in rural areas by volume (versus 3% in urban India) and an impressive 8% in value terms (versus 6%).

Household care products also performed well in both communities, where the category grew 2% by volume and 8% in value in urban areas. In rural areas, it grew 4% in volume and 9% in value.

However, as Sinha noted, there was a marked difference in the foods category where growth declined in rural areas by -5% in volume terms and -1% in value. By contrast, urban areas saw volume growth of 4% and value growth of 6%.

That was good news for companies like Kolkata-based Britannia Industries, a leading baker and biscuit manufacturer which concentrates on the urban market. It saw its sales increase 9% year-on-year in Q4 2014.

Other leading domestic FMCG companies are also encouraged by the improving picture, at least about their prospects in urban areas.

Vivek Gambhir, consumer products managing director at Godrej, the Mumbai-based conglomerate, said he expected good growth in urban areas and more subdued growth in rural areas.

"We are seeing signs that urban recovery has moved up very sharply. In the case of rural, we will have to wait and watch," he said. “Rural subsidies have been rationalised, indicating less disposable income in the hands of rural consumers. So, rural sales will grow less sharply, while urban will pick up."

Data sourced from Business Standard; additional content by Warc staff