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Indian Rural Consumer Market Reaches $6 Billion

NEW DELHI – The Consumer Market, especially Fast Moving Consumer Goods (FMCG), sector in rural and semi-urban India is estimated to cross $20 billion by 2018 and $100 billion by 2025, according to an AC Nielsen survey. Some of the most popular consumer goods included fruit drinks, shampoos and biscuits are among the most bought items in rural and semi-urban India and will continue to be so.

The Nielsen study was conducted across 81 FMCG categories. It revealed that $6 billion were consumed by rural and semi-urban towns of India out of the $30 billion FMCG sales in 2010. It also revealed that growth in the FMCG sector in rural India increased 3.5 times from 2000 to 2010, as compared to 3.2 times in urban India. Ranjeet Laungani, Executive Director, Nielsen, said, “The demand revolution has percolated down to middle India and these towns will behave like the metros of tomorrow,” as quoted by an MXM India. He said that rural India would prove “to be critical for volumes in the long run.”

The study also revealed 4 prime trends that have led to increased consumption in India, namely, premiumization – customers switching from commodities to brands, going from indulgence to regular consumption and greater acceptability. The survey stated that FMCG sector contributes to 2 percent of the nation’s GDP and is steadily growing; rural and semi-urban markets are growing at the rate of 10 percent annually (about $1,063 billion by 2012) and account for 60 percent of the FMCG sales.

In the Annual Global Investor Conference, 2011, conducted by Motilal Oswal, it is stated that the FMCG sector in India has registered a Compound Annual Growth Rate (CAGR) of 11.2 percent from 2000 to 2010, with an average annual volume growth of 8.5 percent. This growth has been attributed to factors like, increased consumption, rise in income levels, changes in lifestyles and demographic changes. The conference highlighted data from an AC Nielsen survey, which stated how the rural sector in India accounts for about 33 percent of the total revenue every year. It stated that the FMCG sector stood at $30 billion in 2010. Food occupies the major chunk in this sector, with about 52 percent, followed by non-food 45 percent and Over the Counter (OTC) 3 percent.

According to Booz & Company, the Indian FMCG sector is expected to grow between 12 to 17 percent by 2020 and would reach a market size of 4,000 to 6,200 billion. According to a study by McKinsey Global Institute (MGI), incomes in India are likely to grow 3 times over the next two decades and India will become the world’s fifth largest consumer market by 2025.

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