Inflation Impact: Sales of FMCG products affected due to rise in food inflation and uneven rains, demand decreased in rural areas.

Inflation Impact: Sales of FMCG products affected due to rise in food inflation and uneven rains, demand decreased in rural areas.

Inflation Affects Rural Demand: Food inflation had skyrocketed between July and September. So in this monsoon season, uneven rainfall was also seen in many states of the country. Due to both these reasons, the July-September quarter has been very difficult for FMCG companies in rural areas. In this quarter, there has been a slowdown in the sales of daily consumption goods due to lack of consumer demand and decline in rural consumption. 

The leading FMCG companies of the country said that in the month of July to September, the effect of rising prices of commodities like wheat, flour, sugar, potato, coffee, along with uneven rains and crop production has been seen. Due to sluggish rural demand, it is a very difficult environment for the FMCG industry. Some positive signs that were visible during the first quarter April-June changed after rising inflation and uneven rainfall. 

ITC said that, ‘‘ Due to below normal monsoon and food inflation, consumption demand from consumers has been low, especially in rural areas. The e-commerce performance of FMCG companies has been excellent. But these companies are facing strong challenge from small local companies. Small local companies are challenging the big companies in big market products like tea and detergent.

Leading FMCG company HUL has registered a massive decline in market share in the second quarter due to increasing competition from local companies and decline in the rural market. HUL’s sales in the September quarter, which include sales of brands like Lux, Rin, Ponds, Dove and Lifebuoy, in rural areas were one percent less than in the last two years. Whereas sales in urban areas have increased by three percent. 

HUL CEO Rohit Java said that after softening of commodity prices, the number of local companies has increased in the market along with reduction in production costs. Analysts also believe that high inflation has affected demand in rural areas. Rural areas contribute more than one-third to the sales of FMCG companies. However, companies are hopeful that there may be an improvement in demand due to the coming election season, better rains in September, low retail inflation. 

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