The rural resurgence visible in the Rs 5-trillion domestic fast-moving consumer goods (FMCG) market has put the spotlight firmly on the hinterland for companies. FMCG majors are expanding direct distribution, adding small packs to their portfolios to tap rural demand.
At the same time, rural-specific promotions at local festivals, door-to-door campaigns offering free samples and trial packs, buy-one-get-one (BOGO) schemes have been introduced to draw the attention of the rural consumer and improve sales, top FMCG executives said.
“Rural-specific initiatives had taken a backseat when urban growth was ahead of rural growth over the last two years. But now that rural is coming back, the focus will have to be on the rural consumer,” says Mohit Malhotra, chief executive officer (CEO), Dabur India.
Dabur gets about 50% of its total sales from rural areas, the highest amongst domestic FMCG players. A resurgence in rural areas, therefore, is critical for its overall sales performance, Malhotra admits.
“We reach about 122,000 villages in the country and our direct reach in terms of outlets stands at 1.42 million out of a total reach of over 7.9 million outlets. To ride this distribution highway, we are creating accessible product bundles in every category from hair oils to oral care, healthcare, foods and supplements, covering Rs 10, Rs 20 and Rs 50 price points,” the Dabur chief executive said.
Rival Hindustan Unilever (HUL), also the country’s largest FMCG company, derives about 35-40% of its sales from rural areas and is bringing its focus back on mass categories, including skin care led by Glow & Lovely, soaps, detergents and tea among other segments.
Market researcher NielsenIQ says that rural growth will continue to outpace urban growth for the next few quarters as the demand sentiment is likely to sustain on the back of higher allocations by the government, as well as a broader infrastructure and income push.
“As green shoots become visible in rural demand, mass skin care, tea, soaps and detergents will also begin to track back. We are taking the necessary actions to stay competitive,” Rohit Jawa, CEO & managing director (MD), HUL, said in a recent earnings call.
In an interaction with FE last week, Saugata Gupta, MD & CEO, Marico said that the company was putting its attention on direct distribution to drive market share gains in rural areas. Phase 1 of Project Setu, Marico’s direct distribution initiative, has been kicked off in six states. The company has earmarked around Rs 80-100 crore over three years to improve direct distribution by 50% under Project Setu.
“The six states are a mix of stronghold and opportunity markets. The initial results have been very promising with direct coverage expansion in rural and urban markets. These new outlets have responded well to the core and new portfolios,” Gupta said.
Coca-Cola India’s vice president of operations Sundeep Bajoria says that the company was strategically leveraging its product portfolio, price packs and distribution network in rural areas to tap into rural demand.
“By adopting a segmented approach, we are accessing new markets. We are expanding our cooler network in India, coupled with the launch of an AI-powered Coke Buddy app for 24-by-7 direct ordering by retailers,” Bajoria said.
The domestic bottled soft drink category emerged the biggest gainers in the June quarter, according to market research agency Kantar, as consumers preferred hydration over nourishment during the summer months. Both PepsiCo and Coca-Cola say that India is a high-demand market and the momentum in the June quarter is likely to sustain over the coming months in both urban and rural areas.
From: financialexpress
Financial News
