One evening, instead of absent-mindedly watching something with an audience rating of 4/10 on Netflix, I scrolled through a list of 2024’s top-grossing Indian movies. One thing stood out: three of the top five films were set in rural India. At the top of the list was Pushpa 2, based in a remote Andhra village. In third place was Stree 2, a horror-comedy that takes place in a small Madhya Pradesh town. Devara, the fifth in the list, is again based in an Andhra Pradesh village. 

 Popular culture is mirroring a shift in India’s consumption story. The latest Grameen Bharat Mahotsav 2025 in New Delhi, held earlier this month, couldn't have been better timed. Discussions focused on rural innovation and sustainable farming. Villages and small cities, often seen as passive participants, are playing a larger part in India's growth narrative, and brands are taking note.

In this week's Analyticks:

• Rural revival: A recovery in rural India helps FMCG players, amid an urban slowdown
• Screener: FMCG stocks outperforming their industry

A rural resurgence amid the urban gloom

The quarterly earnings season isn't looking great so far, especially for the consumer sector. In Mumbai and Bangalore's high-street shops, you see more salespeople than customers. FMCG companies admit that the reluctant Indian consumer is hurting their balance sheets.

Dabur expects its revenue to grow in the low single digits. Analysts estimate single-digit revenue growth for HUL, Britannia, and Nestle. Tata Consumer is expected to deliver healthy revenue growth, but faces margin pressures. 

Mirae Asset Sharekhan projects a weaker overall consumer goods sector for Q3FY25 due to sluggish urban demand, compounded by inflation and fewer job opportunities. This has forced FMCG companies to focus on rural areas, which have been outgrowing cities for the last three quarters. 

Rural consumers increase their spends

Most brands rely on small sachet sizes to penetrate the very price-elastic rural markets. But recently, HUL observed that rural consumers who previously purchased Re. 1 sachets of Clinic Plus shampoo for years, have upgraded to Dove’s Rs. 2 sachets. They are also buying Rs. 10 packs of noodles, chocolates, soaps, and detergents instead of the smaller five rupee ones, according to Kantar’s report. Brand and product preferences are changing, indicating lifestyle upgrades.

Recent income support schemes rolled out by several Indian states like the Ladki Bahin Yojana have also contributed to a decline in consumption inequality.

The change is beyond FMCG. Government data shows that spending patterns in rural areas are diversifying. There’s a growing interest in convenience and health products, with an increase in the share of processed food (from 9.6% to 9.8%), vegetables (from 5.4% to 6%), and fruits (from 3.7% to 3.9%) in consumption expenditure in 2023-24 compared to 2022-23.

The attitudes of rural consumers are also changing. Lakshmi Venu, director of TAFE, a farm equipment company, adds, "The knowledge asymmetry that used to exist between urban and rural is virtually gone. With cheap accessible data, today the rural customer has access to all the same information as the urban resident."

Rising income in non-metros drive luxury goods purchases

Like villages, consumers in tier II and III cities crave upgrades too. Pradeep Bakshi, Voltas’ Managing Director, notes that as per capita income increases in smaller towns, consumers are spending more on luxuries and durable goods.

Non-metro cities like Ludhiana, Jaipur, Lucknow and Coimbatore are witnessing increased spending power. Ethos, a luxury watch retailer, has launched boutiques in Kochi, Dehradun and Mangaluru. Tata Cliq Luxury reported a growing demand for brands like Louis Vuitton, Gucci, and Rolex in cities like Nagpur, Ajmer, and Aligarh. Non-metros now account for more than half of Tata Cliq Luxury's sales.

How are brands responding?

Brands are reaching non-metro consumers in unconventional ways. One example is the decision to launch Pushpa 2’s Hindi trailer in Patna instead of Mumbai.

FMCG companies are pushing their network into more villages. Dabur has reached 122,000 villages out of the over 6 lakh villages in India, and ITC has boosted its rural stockist network by 1.3 times in two years. Mahindra Logistics’ innovative ‘Direct to Kirana’ model has helped a leading multinational expand its market reach by 30% in non-metro cities. Even Durex is getting in on the action, cleverly targeting rural markets with premium products in smaller, pocket-friendly packs.

Smaller cities are making their online presence felt, outperforming metros in data consumption. Users in these cities are consuming 38–42 GB per capita per month, compared to Delhi and Mumbai’s 30–34 GB, and streaming platforms and the digital ecosystem are benefiting. Netflix and Amazon are investing in content delivery networks in cities such as Pune, Hyderabad, Ahmedabad, and Jaipur.

Local and blue-collar influencers such as Siraj Bachchan, a mimicry artist, Ankit Baiyanpuria, a Sonipat-based fitness creator, Rajesh Rawani, a truck driver, Santosh Jadhav from Sangli, and Pawan Bisnoi, an electrician-cum-mason from Fatehabad, are becoming prominent. They drive engagement at a fraction of the cost of traditional campaigns. Brands like Swiggy, Asian Paints, True Elements, and Jindal Stainless are collaborating with them, to connect with audiences in ways that big celebrities often can’t.

A structural improvement in rural consumption?

The government data shows that monthly spending (including social security benefits) in villages has surged 10% YoY, as against 8.5% YoY in cities, during the August 2023-July 2024 period. The gap between rural and urban spending has narrowed. In 2011-12, urban spending was 84% higher than rural. It’s down to 67% in 2023-24. This signals a more balanced economic landscape. Rural consumption growth has recently outpaced urban across most income categories. 

It's time to dig deeper

Rima Bijapurkar, in her book "Liliput Land," challenges the traditional classification of consumers as just urban and rural. She points out that nearly 50% of India’s wealthiest households, reside in rural areas, and run agricultural businesses — busting the myth that wealth is concentrated in metros.

To truly understand the Indian consumer, Bijapurkar argues for more granular data: insights into income patterns, category-wise GST data, and comprehensive rural surveys. Without this, brands risk oversimplifying a complex and evolving market.

Of course, one cannot ignore the looming slowdown in the cities. As the government prepares the budget, all eyes are on how it balances the needs of urban and rural residents, and introduces much needed reforms in ease of doing business and in taxation, that have burdened urban India.

Screener: FMCG stocks outperforming their industries in price change and revenue YoY growthr

Packaged goods & personal products stocks have high quarter change and revenue growth

With the Indian markets undergoing a correction, we examine the performance of FMCG stocks over the past quarter. FMCG stocks are classified as defensive stocks, which provide relatively consistent returns and stable earnings regardless of the overall state of the stock market. This screener shows FMCG stocks outperforming their industries in the past quarter and quarterly revenue growth.

Major stocks appearing in the screener are CIAN Agro Industries & Infrastructure, Polo Queen Industrial & Fintech, Galaxy Cloud Kitchens, Radix Industries (India), Hipolin, Gillette India, Future Consumer, and Gokul Agro Resources. 

CIAN Agro Industries & Infrastructure features in the screener with the highest YoY revenue growth of 452.5% to Rs 126.4 crore in Q2FY25, outperforming the edible oils industry’s average revenue growth by 439 percentage points. This helped the stock price surge by 126.2% over the past three months, outperforming the industry by 127.1 percentage points. The company’s revenue surged on the back of an increase in the agro and infrastructure divisions. 

Gillette India is the only large-cap stock in the screener after outperforming the personal products industry price change by 20 percentage points after growing by 8.5% over the past quarter. The company’s revenue grew by 17.1% YoY to Rs 788.9 crore in Q2FY25, beating its industry average revenue growth by 14.8 percentage points. The company’s revenue increased, driven by an improvement in the grooming products segment. 

You can find some popular screeners here.

Signing off this week,

The Trendlyne Team