Discretion now the better part of thrift
This growth story is facing headwinds now in the form of sticky food inflation, tightening of unsecured credit, weather disruptions impacting supply chain and consumption patterns, as well as a decline in personal disposable income. Little wonder then that the overall consumer demand sentiment has become subdued of late, leading to low volume growth and pressure on margins for consumer companies, which command premium valua tions vis-à-vis the rest of the market.
Rural demand is an important constituent of the overall consumer demand. It is sensitive to factors such as bad monsoons, natural calamities, bumper harvests and government spending. After remaining slack in the aftermath of the pandemic, demand in the rural market has grown faster than in urban areas for the past three quarters. A good monsoon, festive season and electiondriven spending ensured more income in the hands of the rural consumers.
This trend is likely to continue in the near term due to urban consumers witnessing relatively more stress than their rural counterparts. While this will help FMCG companies in boosting volumes from higher sales of their mass-market products, it does not augur well for their high-margin premiumised portfolio that they sell to the urban consumer.
To be sure, during inflationary times, consumers become more value-conscious and resort to downtrading and cutting down on items of discretionary consumption. To cater to this need, large FMCG com panies tend to launch smaller, low-priced value packs that also help them to
