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| FMCG firms draw up plan to sustain growth in rural India |
| Suvi Dogra & Sapna Agarwal / New Delhi/Mumbai Dec 30, 2008, 00:49 IST |
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With rural consumers outpacing urban shoppers in spends on fast-moving consumer goods (FMCG), manufacturers are tailoring their strategy to sustain volume growth next year.
Given the cautious spending the urban consumer has taken to, homegrown FMCG company Dabur has decided to aggressively push fast growing categories such as personal care products, toiletries, soaps and soft drinks in rural markets. Industry experts believe that during the first two quarters of next year, the FMCG industry may see a decline in value growth but strong volume growth in rural markets will help sustain the momentum.
“The urban consumer has felt the impact of the economic slowdown more than the rural one. Since rural market will continue to grow, we will have to suit the rural needs more and invest in understanding the spending patterns there. Rural demand is intrinsic to our growth story,” says Sunil Duggal, CEO, Dabur India. About 75 per cent of the company's sales come from rural areas. Hence, Dabur created a training consultancy module -- Astra (advanced sales training for retail ascendance) — in Bengali, Tamil, Telugu, Malayalam and Kannada languages.
Similarly , beverages company Coca-Cola through its 'Parivartan' programme has trained over 6,000 retailers to display and stock products well in a bid to boost rural penetration.
The rural growth story is intact for players such as Godrej Consumer Products (GCPL) and Marico. GCPL feels that it will see better sales in the rural market in the coming days, especially for its soap brands. It is the anti-lice shampoo Medicare and Parachute Coconut oil which cater to the bottom of the pyramid at Marico and account for 70 per cent of its overall revenues.
"Though rural markets are growing from a smaller base, the numbers can be stark in some categories. Mass products like soaps, detergents, hair oil and biscuits have good sales in the rural market and almost all companies are now re-looking their strategy for this market," said Anand Shah, a sector analyst with Angel Broking. The low penetration level of FMCG products give added opportunity to manufacturers.
According to the Associated Chambers of Commerce and Industry of India (Assocham), in calendar year 2006, the total FMCG market size was estimated at $15 billion, of which the rural segment was around $2 billion. The FMCG sale size by end of November 2008 was estimated around $23 billion, of which rural segment expectedly consumed FMCG products to an extent of $4 billion.
"Today, about 70-75 per cent of the home and personal care markets (HPC) is soaps, detergents, and toothpaste. While consumption in the rural markets — which account for 30-50 per cent of the overall HPC market — is increasing, there will be some downtrading with urban consumers in the detergent and soaps categories," says Gopal Vittal, executive director (home and personal care), Hindustan Unilever (HUL).
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