The surge in wheat flour (atta) prices, which have reached a 15-year high, is significantly affecting the fast-moving consumer goods (FMCG) sector in rural India. According to a recent Kantar report, the rise in atta prices is slowing growth in rural FMCG consumption, which recorded just a 4% increase in the quarter ending October, lower than urban growth at 4.5%. Wheat flour prices have remained elevated for several months, despite government efforts to control food inflation. In December, the all-India retail price of atta hit Rs 40 per kg, marking the highest rate since January 2009.

The report highlights that while rural FMCG growth is slower due to the wheat price surge, other categories like personal care have shown resilience. Personal care growth in rural areas increased by 5.4% in the quarter ending October, up from 2.8% a year ago, indicating a positive outlook in other sectors despite the pressure on wheat flour.

While there are concerns about rainfall affecting the rabi season, the agricultural industry is expected to grow, supported by the government’s focus on rural development. This is expected to sustain rural FMCG performance despite continued inflation, at least in the first half of 2025.

Several FMCG companies, including Britannia Industries and Parle Products, have acknowledged the commodity cost pressures and hinted at price hikes. Britannia’s Managing Director, Varun Berry, mentioned that lower wheat crop yields and government stock limitations are key factors driving the price increase. However, there are hopes for improved wheat production in the coming year.

In urban India, FMCG consumption slowed by 4.5% in the quarter to October, compared to 6.9% growth during the same period last year. Despite the slowdown, Kantar describes it as a mild dip rather than a significant slump. Urban FMCG expenditure per household rose 13% over the past two years, reaching an average of Rs 6,761 per quarter in October 2024.

The Kantar report also notes that after a slowdown in the previous three quarters, FMCG value growth has outpaced volume growth, driven by rising prices. This trend, attributed to food inflation and an 11.1% consumer food price index in urban areas, is expected to continue, with urban FMCG growth stabilizing at current levels into 2025.