Urban demand to recover in 2021; e-commerce to continue rapid growth: ReportNEW DELHI: Urban demand is likely to recover and demand in rural markets would sustain its robust pace of growth, a new report by Edelweiss Securities said on Tuesday.

“We expect most consumer goods companies to report strong growth in the year owing to recovery in urban demand, favourable base and gradual resumption of out-of-home consumption,” the report said.

While rural India has been the primary growth driver of the fast moving consumer goods sector and this trend is likely to sustain, urban demand could also start normalising.

The report said discretionary products could see stronger growth, and that consumer companies would regain their pricing power in the year after a lull. Prices of many key raw materials like palm oil, tea, copra, edible oils are up sharply and companies have started to selectively hike prices, faced with raw material cost pressures.

E-commerce is likely to gain share and possibly become bigger than modern trade in five-seven years, though modern trade would recover lost ground, it added.

The report also highlighted that health-based products and naturals would continue to grow, and that companies would rationalise packs and increases in direct reach to consumers.

“Where there will be changes in demand trends, channel mix, consumer portfolios and supply chain logistics, challenges such as pre-covid costs will remain. Sanitisers will continue to reverse sharply from their peak and most new and non-core entrants could eventually exit the category, the report said. In-home food consumption, which was the big trend last year post the pandemic outbreak, is likely to taper to a more normalised level.

Nielsen said in a recent report that penetration of online shoppers who bought daily use essentials products during the festive season was at 20% compared with 13.5% in 2019. In terms of packs sold, the FMCG category was at 35% of all purchases made online, compared with 30% in 2019, led by a surge in demand for personal care products.

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