Will It Rain Good News in the Hinterland?
A Study Into The Link Between Monsoons And Rural FMCG Sales
Each year, the rains bring Indians cheer and respite from the heat. And retailers and manufacturers should also feel refreshed when weather shifts. A recent study shows that monsoon season can influence FMCG sales in rural India.
The country’s economy has been on a downward slope since 2010. But significantly, over the last two years, the rural regions’ value growth rate is keeping the national sales growth average at double-digit figures.
What Affects FMCG Sales In The Hinterland
The usual suspects that drive FMCG sales patterns are consumer sentiment, agricultural production, industrial production, inflation, macroeconomics and the government’s annual budget policies.
Rainfall, however, also has a notable effect on rural FMCG sales. A poor monsoon lowers agricultural output and can lead to higher inflation. This in turn leads rural consumers to cut down on discretionary spending.
Consumers’ current dependence on the monsoon season reflects the fact that nearly half the working population’s livelihoods are linked to agricultural activities. Having said this, agriculture’s effect on the country’s GDP is far less today than a few decades ago. And rainfall does not seem to have as significant an effect on urban FMCG sales.
The Monsoon Forecast
If all macro variables like agricultural production, inflation etc., remain on track and rainfall reaches 87% of its annual potential as predicted by IMD (Indian Meteorological Department), then FMCG sales growth in the second half of 2014 should be as high as the first half. While the sales growth rate is slower than 2013, rural India is likely to pull off 8%-10% value growth in 2014 versus a year ago.
For more details download the full report (top right).