Rural demand still sluggish, may take another year to bounce back, says CavinKare’s founder CK Ranganathan

Rural demand for FMCG products continues to be sluggish for over a year now, Chennai-based FMCG firm CavinKare’s Founder Chairman CK Ranganathan said on Monday, adding that he foresees it continuing that way for another year in the absence of incentives to boost disposable incomes of the rural sections. 

“Rural demand is still sluggish. Urban demand is growing very well. We've not seen such a vast difference between rural and urban demand. Normally, rural is slightly lower than urban demand. But this is an odd one where we are seeing rural is not participating,” he told Business Today on the sidelines of the Global Investors Meet in Chennai on Monday.   

His comments come as rural volumes on consumer staples have been lagging urban growth for over a year now. Brokerage firm Nuvama Institutional Equities recently pointed out that rural demand would continue to be difficult during October-December 2023, which could hinder FMCG industry’s volume growth. 

Ranganathan added that the trend has continued for over a year, and that rural demand appears to be in no hurry to bounce back. “More disposable money in the hands of rural (section of the population) would help. Without an impetus, it may even take a year,” he said.  

Analysts have projected rural demand to either decline or remain flat due to inflation, with the upcoming general elections and a further reduction in inflation likely to lead to a gradual improvement in FY25.  

Retail or consumer price index-based inflation rose to a 3-month high of 5.55 per cent in November 2023, mainly due to rise in food prices. In October 2023, it was 4.87%. The Reserve Bank of India (RBI) has set 6 per cent as its upper tolerance limit for inflation. 

To offset the lagging rural demand, the maker of Cavin’s milkshake and Chik shampoo is targeting covering a greater number of villages. “We used to cover 50,000 villages, now we are looking at 1.5 lakh villages across our product categories.” Besides, the firm is also looking to increase pack sizes in urban areas to leverage higher demand. “Urban consumers are ready to upgrade to family packs. When urban areas are showing higher growth, it is important to upgrade these customers to the next level,” he said. 

The homegrown brand, which began as a personal care brand, has grown into an FMCG conglomerate with dairy, snacks, food, beverages and professional care business lines. The private company made an annual revenue of Rs 1,700 crore in FY2020-21.