Fast moving consumer goods (FMCG) major Emami Ltd has claimed its rural market focus is pushing the sales of the company in difficult economic situations. Rural marketing through direct channel contributes about 23 per cent of the firm’s total sales, which it expects to increase to more than 35 per cent in the next three years.
“Rural consumers had more cash to spend following successful government schemes and favourable monsoons; Emami accelerated product ruralisation. As a result, the direct rural reach grew substantially in 2011-12 and now contributes about 23 per cent of total sales,” the firm’s founders R S Agarwal and R S Goenka noted in its annual report.
The Kolkata-based company had posted 16.6 per cent rise in net sales for the financial year 2011-12 to Rs 1,453.51 crore, compared to Rs 1,247.07 crore in 2010-11. Since 2009-10, when the firm launched its rural focus programme called Project Swadesh, there has been a 42 per cent rise in income from operations from Rs 1,021.7 crore. Emami’s net profit for 2011-12 also increased 13.2 per cent to Rs 258.84 crore, against Rs 228.72 crore during the financial year 2010-11
“While the direct distribution channel, which has reach in 10,000 villages across the country, is contributing 23 per cent of our sales, we believe it is going to touch the 35-38 per cent mark in the next three years. Currently, including the direct and indirect channels, rural markets contribute about 45 per cent of our total sales, which we expect to be above 50 per cent by that time. This strategy has boosted the sales of brands like Boroplus and Navratna and also the smaller brands,” said N Krishna Mohan, chief executive officer, sales, supply chain and human capital
Citing that rural focus has helped the company, managing director Sushil K Goenka said in the report, “We created a new segment—rural—covering towns/villages with a population of less than 50,000 under Project Swadesh. The company adopted a hub-and-spoke model in these areas by appointing super-stockists and sub-stockists. By the end of the year, the company had 160 superstockists and 4,000 sub-stockists.” According to the firm, around 24 per cent of the business was recorded directly through this model. Through Project Swadesh, in which its agents moved around villages in vehicles, Emami had reduced its dependency on wholesalers.
Emami had also increased its direct retail coverage from 450,000 outlets in 2010-11 to 500,000 outlets in 2011-12, while its indirect reach is over 3.6 million retail outlets. “We invested around Rs 229 crore in brand promotion, which was around 15.8 per cent of our revenues,” he said. Goenka added that more super-stockists, sub-stockists and direct retailers would be appointed to strengthen the rural distribution channel. The company had also reached out to the rural consumers via marketing in local events like Kumbh Mela and through cultural shows like Jatras.