RURAL BUYING DRIVES FMCG GROWTH

Noodles, macaronis and soft-drinks made rapid inroads into the rural markets driving up growth in the fast moving consumer goods (FMCG) industry - 10% by volume and 12% by value - in the first ten months of 2011. The consumption story for most part of last year dispelled slowdown fears as Indian rural households piped urban counterparts in growth sweepstakes.
Rural India had clocked a negative volume growth during 2010 (here volume growth is the increase in sales clocked over last year while value growth is volume growth plus price hikes). The urban FMCG market on the other hand, grew 4% by volume and 7% in value and was led by categories such as ready-to-eat mixes, deodorants, breakfast cereals and soups. Growth for personal care products such as toilet soaps, shampoos and household products stagnated compared to last year, while F&B space saw a healthy growth. Sources said the F&B market witnessed hectic action in rural India with players like ITC and Hindustan Unilever (HUL) leveraging their distribution muscle to push products in this category. ITC's Sunfeast noodles and HUL's Knorr brand of soups have been able to penetrate the hinterland leading to increase in the category reach. 
The FMCG biggie saw its personal, oral care and health supplements report strong growth in the rural markets. While the low-penetrated products in the F&B space witnessed good growth, detergents, washing soaps stagnated volume wise. In the urban market emerging categories, noodles, macaroni, vermicelli grew 20% in terms of volume, while ready-to-cook mix products saw a whopping 64% growth and soups grew by 20%. In the personal care category, which largely remained stagnant in the urban market, deodorants saw a 31% growth. 
There have been some concerns  over consumer spending with price hikes being taken across the board by FMCG companies to offset the impact of rising input costs. Because of healthy disposable income growth and lower absolute spends on FMCG products it hasn't impacted the consumption yet, however if there is uncertainty around income growth risks of down trading exist. 

Source :  Times of India (Electronic Edition): January 12, 2012