Changing trends of the FMCG sector in India: Rural is the new urban

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The FMCG sector is the fifth largest sector in India. With its sizeable share in the market, goes to show that goods have seldom had trouble selling themselves. However, with the pandemic and restriction on movement, households have been wary of the frequency at which they purchase packaged/FMCG goods. That being said, the companies of the FMCG sector seem to be finally looking at a revival to pre-COVID levels. With big brands like HUL, Dabur, Godrej, Emami, Nestle, ITC, Tata, P&G, etc. being the biggest players in FMCG, this might as well be the start of the country’s economic recovery.

What is FMCG?

FMCG stands for Fast-Moving Consumer Goods. The products you are using in everyday life - toiletries, dairy products, confectionery items etc. all belong to this category. In India, the household and personal care categories of FMCG account for almost 50% of the sector.

Back in 2019, a fall in the demand from rural areas resulted in a slowdown of the industry. The slowdown crept its way into 2020 and was further worsened due to the pandemic. However, as the business picks up pace, there are some changing trends in the FMCG sector worth noting.

How is the pace picking up for FMCG?

In May and June, the sector saw a definitive rise that indicated growth that would bring FMCG to back to the pre-COVID levels. While both, rural and urban India has started to show a growing trend, experts say that rural India is bouncing back faster than the urban sector.

Categories like daily use items, beauty, hygiene, have witnessed a rapid revival. The food sector has also been leading with packaged items such as flour, oil, and cheese. Many customers are giving thought to what they consume from a health perspective. Healthy foods, home hygiene, medical, fitness, etc. are categories that are not very far behind. The categories that have faced a major setback and are yet to show promising recovery include travel, dining out, alcohol, and tobacco. 

Further, a notable change has been seen in the way consumers are purchasing these items. Instead of physical stores, a shift to e-commerce has accompanied the changing trends in the FMCG sector. Online shopping has increased by more than 20% according to a report by Neilsen Global Connect.

Why are small-towns performing better?

Different markets have responded to COVID-19 differently. For most categories, and brands in FMCG, the urban sector forms a massive chunk of the consumer base. However, with the initiation of the lockdown, reverse migration from cities accelerated. Over 25% of migrants moved back to their rural origins as the pandemic began. Many of them are expected to make this return permanent. This means that part of the consumer base has moved to geographical locations that fall in rural India.

Adding to this is the fact that the urban population has faced a wave of unemployment, that rural has not. Food and agriculture have kept moving throughout the pandemic, while the organized sector has suffered a setback. The loss of disposable incomes is bound to affect the consumption of goods in urban India.

With uncertainty still looming, rural India has once again helped carry the weight. Here's to hoping that these upward trends are here to say and a day comes when the divide between rural and urban India reduces. 

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