By Kritika Arora
Rural areas have started seeing an improvement in sales of packaged food products in the last few weeks, according to some fast moving consumer goods (FMCG) companies. The companies attribute this uptick in sales to better affordability due to high agricultural commodity prices last year and forecast of normal monsoons.
Segments like food, snacks and lower price-point products have already seen reasonable demand in July so far, said Sanjeev Asthana, chief executive officer at Patanjali Foods. Rural incomes were decent last year due to high agri commodity prices. With more affordability coming in and price points being offered by companies, there is a reasonable expectation that demand should come back from rural areas, Asthana told FE.
Rural markets, which contribute around 35% of the total FMCG sales in the country, have witnessed subdued demand in the last few months due to steep inflation and have seen consumption declining for three consecutive quarters starting July last year. According to Neilsen IQ data, consumption in rural areas declined 5.3% in January-March quarter as an incessant price increase by companies to pass on a spike in their input cost hit customers’ wallet.
Last fiscal, wheat prices rose 10%, maida 7%, gram 5%, gram flour 6%, milk 11%, sugar 5% and palm oil by 38%, according to Crisil. However, now, the decline in palm oil and other commodity prices should ease pressure on other products as well which use them as key input ingredients.
“Both the prediction of normal monsoon and better agri-commodity prices have developed a favourable situation in rural areas and we have seen a revival in rural demand for biscuits, snacks and other food items in the April-June quarter”, said Mayank Shah, senior category head at Parle Products. The revival in sales of packaged food products gives confidence that rural demand should pick up substantially going ahead and be the saving grace on the overall demand front, said company executives.
Echoing the sentiment, Emami Agrotech told FE that with good monsoons predicted and also with the commodity prices cooling-off, there might be a good uptick in sales from the September quarter of the financial year, which is also the festive period. “We expect to see a strong growth revival in the packaged food category almost immediately and then would see a revival in the other categories going ahead”, said Krishna Mohan Nyayapati, Director, Emami Agrotech.