India's grocery bill reveals a tale of two markets

India’s fast-moving consumer goods (FMCG) sector is witnessing a growing divide in consumer preferences across cities and villages.

As inflation, digital access, and distribution patterns evolve, urban shoppers are showing increasing interest in unbranded and digital-first products, while rural consumers are doubling down on legacy branded goods, reveals a market trend analysis by The Times of India's Asmita Dey.

Urban India's unbranded boom
In urban India, inflation and increased online visibility have played a major role in driving consumers towards unbranded items in everyday categories like rice, flour, spices, oils, and household cleaners. According to data from Kantar, unbranded products recorded 8.4% volume growth in urban areas in FY25, far outpacing the 2.3% growth in rural markets.

“Currently, about 26% of the FMCG volumes come from the unbranded segment in urban India... they are strong in categories like atta, rice, spices, edible oils, and floor cleaners. Price plays a big role in picking up unbranded products in segments like floor cleaners, and inflation likely nudged more metro shoppers to shift to unbranded goods. However, unbranded doesn't always mean it is cheap. In categories such as coffee, while unbranded is relatively a smaller portion, people go for unbranded for its taste and aroma,” said Manoj Menon, director, commercial at Kantar Worldpanel, South Asia, in a statement to TOI.

Volume growth for 22 listed FMCG companies stood at just 2.1% in urban areas, reflecting how traditional players are losing ground in cities, even as rural demand rises.

Rural India's trust in legacy brands
On the other hand, branded FMCG companies like Nestlé, Dabur, HUL, and ITC are continuing to gain rural market share. Distribution strength and deep penetration have helped legacy firms grow volumes by 5.1% in rural India, according to TOI, citing NielsenIQ data for the March quarter.

“The rural consumers across all income segments are exhibiting a marked propensity towards spending on premium, high-quality products which are backed by strong brand values, even at a high price,” said Mohit Malhotra, CEO of Dabur.

Dabur has been expanding its rural footprint with affordable, rural-specific packaging. Similarly, Britannia and ITC have been tailoring rural outreach through wider distribution and product innovations, even as they test urban launches through quick commerce and digital-first channels.

New-age brands tap urban appetite
City shoppers, driven by access to mobile phones and a culture of online product discovery, are fuelling the rise of digital-first brands.

“More prominently in urban India, consumers are trading up across categories. They are growing out of FMCG brands of the past. Product discovery is happening online, and many of the new-age brands are not yet available in general trade,” TOI quoted Mayank Rastogi, markets leader, strategy and transactions practice at EY India, as saying.

“D2C new-age brands with their succeed or fail-fast DNA are quick to change product formulations, packaging,” Rastogi added.

Brands like Slurrp Farm, which focused early on millet-based products, have gained momentum from online demand. “Quick commerce now contributes 35–40% of total sales,” said co-founders Meghana Narayan and Shauravi Malik to TOI.

Big FMCG’s twin strategy
Large FMCG players are now deploying dual strategies: One for digital-savvy urban shoppers and another for rural buyers.

“While quick commerce is an emerging channel (in urban areas), it currently addresses more impulse and top-up needs,” said Angshu Mallick, MD & CEO at AWL Agri Business.

Britannia is launching digital-first products to attract metro consumers, while ITC is placing early-stage urban innovations through quick commerce platforms. “A lot of ITC's new products in urban areas today are quick commerce first,” said Sandeep Sule, divisional chief executive, trade marketing & distribution, FMCG at ITC.

(With inputs from The Times of India)