NEW DELHI: The consumer goods sector is seeing signs of a firmer consumption recovery, with volume growth becoming more visible across companies, even as cost pressures remain. This comes as the West Asia conflict has pushed up crude-linked inputs, packaging and freight costs for FMCG companies, raising concerns that the disruption could eventually weigh on demand.Major companies including Nestlé and Marico reported double-digit volume growth in June quarter, while HUL, Tata Consumer and Dabur also saw underlying volume momentum. After several quarters, in which growth was largely driven by inflation-led price increases, companies have reported a stronger consumer offtake, analysts and companies told TOI.Most of the quarter was marked by average 8-10% raw material cost hike, led by crude-linked inputs like packaging and edible oils with a rise in palm oil prices, which led to a pressure on margins. Most players resorted to selective price hikes and grammage cuts to offset cost escalation in June.“During the quarter, consumer demand remained strong, with industry navigating geo-political crisis and increased raw material costs by improving efficiency and limiting price hikes to around 3-5%. Also, urban consumption has nearly caught up with rural demand now. The industry is hopeful that festive season could be a growth driver for urban demand for rest of the year,’’ Mayank Shah, chief marketing officer, Parle Products said.Rural India continues to be a bright spot in the consumption landscape, outperforming urban markets for the eighth consecutive quarter. The gap between the two has narrowed with urban demand being driven by a strong performance of modern trade, quick commerce and premium products.“As per syndicated data, rural demand grew 170 basis points ahead of urban demand in the first quarter, with growth of 6.2% in rural versus 4.6% in urban markets. We believe this reflects a healthy broadening of India’s consumption story across urban and rural India,” Dabur India global CEO Mohit Malhotra earlier said.
