Consumption of daily groceries and essentials in villages outpaced cities in July, reversing the trend of June. Urban growth was higher than in rural areas for the first time in nearly two years in June. With the Covid situation improving and good monsoon rain, rural growth is expected to bounce back and be in line with urban growth going forward.

Last month, sales grew 24% in rural markets while urban sales expanded 14% from June, according to the latest numbers from Bizom, which tracks the sales of 7.5 million retail stores across the country. Rural has been growing faster in the past two years, underpinned by higher farm income, minimal retail disruption during the 2020 lockdown and migrant workers returning home. But villages saw a surge in infections during the second Covid wave this year. That led to rural growth of 33%, against 64% growth in cities in June from May.

“While rural demand continues to grow at a steady pace, urban demand outpaced rural demand in the recent months, riding on the growing relevance of ecommerce, the improved performance of modern trade and chemist outlets, coupled with limited closure of general trade outlets,” said Dabur chief executive officer Mohit Malhotra.

The overall consumer goods market saw demand getting hit in May but recovered sharply in June and July. Rural markets, which had been more resilient, also saw interventions with free supply of food grains, direct transfer of money and the outlay on the rural jobs guarantee programme helping to ensure that demand would be durable.

Companies said wholesale mandis were closed and some distributors were impacted in rural areas.

“In April and May, rural channels were in disarray as distributors and sales staff were also hit by Covid cases,” said Krishnarao Buddha, senior category head at Parle Products, India’s largest biscuits maker. “However, we have seen sequential recovery in demand with July better than June and the current month posting an even better growth number.”

Also, large categories such as staples and commodities that declined due to price hikes in May recovered after companies slashed prices, which could have helped boost rural demand.

“In July, we saw strong traction for commodity products as more kiranas opened across rural markets with the easing of restrictions,” said Akshay D’Souza, chief of growth and insights at Mobisy Technologies, which owns Bizom. “Many of these stocked aggressively on commodities such as edible oils as consumers returned back to stores.”

The FMCG market’s recovery was stalled by the alarming surge of Covid cases toward the latter part of April. Unlike the first wave, this hit the rural areas as well. Marico, in its earnings call, said the only difference during the second wave was rural, especially southern markets, were affected.

“Given that the monsoon is good, the entire government direct benefit transfer continues to do well, and if vaccination rates and there is no major third surge, we believe that the rural consumption will continue to be reasonably going,” Saugata Gupta, MD at Marico, told investors.

Rural India back with a bang, leaves cities behind in consumption

By ariox