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As stocks of fast-moving consumer goods (FMCG) companies keep growing, the sector growth has slowed down due to less packaged food consumption among the Indians and slowdown in daily online grocery demand on various digital platforms, according to a report. 

Latest insights from leading market consulting and intelligence firms Kantar and NielsenIQ, the FMCG sector growth slowed to 4 per cent in the April-June quarter (Q1 FY25), compared to 12.2 per cent in the same period last fiscal.

The reasons cited in the data are price drops, reduced packaged food consumption (amid severe heatwave) and daily household products and groceries not selling as fast on various quick grocery delivery platforms as compared to last year.

The urban market did not record growth for three straight quarters, and is contending with a huge Q2 2023 base. The falling Urban curve coupled with a strong base is likely to constrict the numbers for the next quarters.

Rural growth again outpaced urban areas and big FMCG companies maintained better performance than smaller firms. Consumption gaps between urban and rural markets are narrowing down.

In the Union Budget, Finance Minister Nirmala Sitharaman decreased income tax and increased standard deduction rebate, a move that is likely to boost FMCG sector growth.

According to the Kantar FMCG pulse report for Q2, rural India has bounced back as a buyer of FMCG such as soaps and soft drinks.

The start to 2024 from a rural perspective has been brilliant, with rural growth overtaking urban's; and the rural worm is looking upward, the report mentioned. This growth in the rural areas has been fuelled by region-centric measures announced by the government in the interim budget earlier this year, which provided stability.

Although inflation may have slowed down to acceptable levels, it still has an impact on the consumer.

Looking ahead, the FMCG market in India remains resilient despite challenges and is poised for a 4.5-6.5 per cent growth in FY24, according to a recent NielsenIQ ‘FMCG Quarterly Snapshot’.

“The industry’s ability to navigate complexities and adapt to evolving market dynamics underscores its significance in the Indian economy, offering promising opportunities in the future,” the earlier report mentioned.