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Small towns driving FMCG growth

Viveat Susan Pinto  |  Mumbai 

Over last three years, middle India, or consumers in towns with a population between 100,000 and 1 million, has largely driven consumption of fast-moving consumer goods (FMCG). But, now, the trend is increasingly shifting to small towns, or areas with population less than 100,000.

A study released by market research agency Nielsen shows small towns have been the prime driver of FMCG growth in the last 12 months. “FMCG growth in small towns has been around 19 per cent as opposed to about 11 per cent in metros, and 12-13 per cent in middle India. Rural (India), too, has been below 15 per cent,” said Justin Sargent, managing director, consumer at Nielsen India.

While middle India towns are estimated to be about 400 in the country, small towns, according to market experts, are steadily growing. By industry estimates, small towns are well over 2,000 in India. With growing affluence, it is increasingly the villages that are morphing into small towns, they said. This is showing in consumption of products.

For instance, the Nielsen study says products such as hair conditioners, air freshners, prickly heat powders, after-shave lotions and liquid toilet soaps have driven consumption in small towns. “These specialist products, which you would never associate with a consumer in a small town, is now a part of his shopping basket,” Sargent said.

Also, consumers in these small towns are willing to spend more than their counterparts in metros. “For instance, people in small towns were willing to shell out more on mobile phones than in metros or mini-metros. Their desire for entertainment or their need to look good or stay connected is growing,” he added.

More so, these consumers don’t seem to be shying away from experimenting products. In food items, for instance, small-town consumers are trying out products such as jams and cheese — products that have hardly been a part of their food plate. “Pre and post-wash products, jelly cubes are showing growth,” Sargent said.

Are marketers then doing enough to target the small-town consumer? Sargent says while marketers have driven small packs in small towns in keeping with the broad trend of driving low-value units in these areas, things will have to change.

“Small-town consumers want to shop like their counterparts in metros and mini-metros. So, while small packs are still relevant in these markets, marketers will also have to take note of these new emerging segments. Similarly, retailers will also have to reorient their focus when thinking of setting up their stores. Do they need to target these small towns? What kind of products can take off here, etc,” Sargent added.

Consumer pull in small towns 
(Q4 2011 over Q1 2011)**
Consumer pull in middle India 
(Q4 2011 over Q1 2011)
Category % pull* Category % pull*
Cheese 103 Cheese 58
Prickly heat powder 53 Prickly heat powder 48
Packaged rice 47 Pre/post wash 44
Hair conditioners 44 Home insecticides 34
Pre/post wash 41 Baby foods 33
Jams/jellies/marmalade 41 Fragrances 27
Jelly cubes 40 Blues 25
After shave lotions 33 Air freshners 25
Liquid toilet soaps 31 Baby oils/massage oils 25
Blues 29 Milk powders 24
* Consumer demand at point of distribution; ** Calendar year              Source: Nielsen

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First Published: Tue, August 28 2012. 00:52 IST