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Regular-article-logo Tuesday, 05 March 2024

Rural sales lead revival

Agrarian economy to get ahead of urban regions which are coping with job losses, salary cuts and continuous lockdowns

Our Special Correspondent Mumbai Published 06.07.20, 01:40 AM
A farmer works on a  paddy field in Vijayawada  on Saturday.

A farmer works on a paddy field in Vijayawada on Saturday. PTI

Consumer goods companies have reached 85 per cent of their markets by June after a near wipeout of their reach in April, with the recovery led by the rural regions.

Analysts said the coverage should go up further over the next one month as the companies gear up to delare their results for the first quarter. Analysts expect the companies to fare poorly because of the lockdown and they are more keen on the guidance for the rest of the year.

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The view is that rural India will grow faster as the job losses, salary cuts and continuous lockdowns have impacted urban recovery.

According to Nielsen, consumption growth in rural India — which make up 36 per cent of the expenditure on fast moving consumer goods (FMCGs) — has touched 85 per cent of pre-Covid levels while growth in cities has touched 70 per cent of the pre-Covid levels.

Nielsen said rural consumption is recovering faster because of higher allocation under the rural job guarantee scheme, reverse migration of around 4 crore people bumper rabi harvest and prediction of good monsoon for the second year in a row.

The market research agency said over the next nine months, the overall FMCG segment will grow at around five per cent. But demand from the rural markets will be twice that of urban areas, reversing the trend seen during the past couple of years.

According to an Edelweiss Securities report, demand will accelerate for packaged foods such as biscuits and noodles, staples such as atta, pulses, coffee and tea, premium edible oil, health & hygiene such as mosquito repellants, nutrition items such as chyawanprash and honey and naturals. However, the market for skin care will not do well.

“Covid-19 has triggered a strong shift away from street/outside food to in-home consumption, which will largely flow to leader brands as they have higher consumer trust and perceived quality. Almost all other categories are reviving and will accelerate from the second quarter of 2020-21’’, they added.

In a recent filing to the stock exchanges, Marico said that it witnessed significant disruptions during the first fortnight of April, But it has has been able to steadily scale up operations to near-normal levels in the month of June. Further, the distribution network also improved progressively during the quarter with the Government gradually easing the movement of food and grocery items of daily use.

Pointing out that during the first quarter, general trade and e-commerce channels gained over modern trade due to heightened social distancing concerns, it said that the volume decline on a year-on-year basis will be in low teens.

Despite the first quarter top line set to yield a single digit growth over the annual run rate of 2019-20, Marico known for its brands like Parchute and Saffola among others added that it will bounce back to posting volume and value growth during the rest of the year.

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