Consumer goods makers, over the last few quarters, grappled with subdued sales in the hinterlands as people cut back spending on both essentials and discretionary items amid price pressures.

Sales volume in the sector increased 6.4% in the fourth quarter of calendar year 2023, slower than the 8.6% growth in the previous quarter, NielsenIQ said, as growth at smaller stores fell short of large supermarkets.

However, there was an uptick in rural demand.

"For the first time in 2023, consumption gaps between urban and rural markets are narrowing," said Roosevelt D'souza, head of customer success at NielsenIQ in India.

Sales volume in rural areas climbed 5.8% in the December quarter, compared with a 6.8% growth in urban regions, according to NielsenIQ. In the previous three quarters, urban consumption had outgrown rural by 3.8 to 6.2 percentage points.

In rural India, "habit-forming categories", such as biscuits and noodles, thrived as product prices slipped 0.4% across the country, marking the first decline in more than two years, NielsenIQ said.

Packaged food manufacturers, including Saffola cooking oil-maker Marico and Good Day biscuits-maker Britannia Industries, have cut prices on the back of easing commodity prices to better compete with smaller rivals.

Consumer goods majors Hindustan Unilever, Pepsi India bottler Varun Beverages and Adani Wilmar and ITC have so far reported mixed results for the December quarter. Meanwhile, Dabur India said growth in rural areas outpaced urban pockets.

NielsenIQ expects the consumer goods sector to grow 4.5% to 6.5% in 2024, with the government's measures to support the rural economy boding well for companies that have a significant presence in rural areas.

(Reporting by Praveen Paramasivam in Chennai; Editing by Eileen Soreng)