Con­sumer Cos Shift Fo­cus to Ru­ral In­dia

Com­pa­nies work­ing on af­ford­able low unit packs, new prod­ucts

The Economic Times - - Brands & Companies -

Ratna Bhushan & Wri­tankar Mukher­jee

New Delhi | Kolkata: Con­sumer goods com­pa­nies are al­ready work­ing on their strate­gies for the ru­ral mar­kets, where they ex­pect de­mand to get a boost from Bud­get sops. Af­ford­abil­ity will be the pri­mary fo­cus as com­pa­nies tar­get the ru­ral folks. In the off­ing are more small packs and en­try-level prod­ucts from bis­cuits and toi­letries firms to ap­pli­ance mak­ers.

“With its pro-ru­ral, bot­tom-of­pyra­mid fo­cus and (the Bud­get) be­ing non-in­fla­tion­ary, we ex­pect growth will re­turn to ru­ral mar­kets af­ter a gap,” said Dabur chief ex­ec­u­tive Su­nil Dug­gal. “This is a pro-con­sump­tion Bud­get for the ru­ral econ­omy and, af­ter the set­back of de­mon­eti­sa­tion, it helps es­pe­cially for com­pa­nies like ours with a strong ru­ral fo­cus.”

Fi­nance min­is­ter Arun Jait­ley’s Bud­get pro­poses to spend more on the ru­ral side with an aim to dou­ble the farmer’s in­come in five years. Ru­ral de­mand has been slow to re­bound af­ter de­mon­eti­sa­tion com­pared with the rest of the coun­try. With the Bud­get balm, ex­perts ex­pect the sit­u­a­tion to change fast.

Bri­tan­nia manag­ing di­rec­tor Varun Berry said the bis­cuits maker will ren­o­vate its en­trylevel Tiger’s brand. “There will be an over­all thrust on all .₹ 5 and 10 packs in small towns and vil­lages. Dis­tri­bu­tion in­roads in ru­ral will re­main our big­gest ini­tia­tive,” Berry told ET. Dabur’s Dug­gal said his com­pany will launch small packs of ex­ist­ing brands such as Dabur Red tooth­paste and is ex­plor­ing prod­ucts tar­get­ing the ru­ral con­sumer in cat­e­gories such as hair oil. Marico, the maker of the Para­chute hair oil, plans to step up pro­duc­tion of low-priced packs, cost­ing .₹ 2-10, across cat­e­gories.

“Our ru­ral con­tri­bu­tion has moved from 25% to 33% over the past few years. We hope to in­crease that num­ber by a few per­cent­age points, now with more cre­ation of jobs ex­pected in the ru­ral sec­tor,” manag­ing di­rec­tor Sau­gata Gupta said. “We are ex­pect­ing a much re­quired stim­u­lus for reignit­ing con­sump­tion af­ter the slump caused by de­mon­eti­sa­tion.”

Mak­ers of tele­vi­sions, refrig­er­a­tors and wash­ing ma­chines, too, said they will step up launches, pro­mo­tions and dis­tri­bu­tion of en­try-level prod­ucts. “Con­sumers in the .₹ 2-4 lakh in­come bracket tend to buy en­try-level prod­ucts. Be­sides a pos­i­tive rub-off ef­fect, some of them are prob­a­bly up­trad­ing their pur­chases,” said Go­drej Ap­pli­ances busi­ness head Ka­mal Nandi.

NOW OR LATER?

The past two years have wit­nessed back-to-back ta­per­ing off of growth in house­hold cat­e­gories across ru­ral In­dia.

Re­searcher Nielsen had said that in the two weeks af­ter the note ban, ru­ral mar­kets that ac­count for about 35% of all FMCG prod­ucts sold were hit harder than cities, with dis­trib­u­tors’ stocks pil­ing up as a re­sult of lower pur­chases by re­tail­ers and whole­salers. The sops come at a time when sales of refrig­er­a­tors, wash­ing ma­chines, mi­crowave ovens and tele­vi­sions too had taken a se­vere beat­ing since de­mon­eti­sa­tion. Sales fell as much as 40% in Novem­ber and though the num­bers im­proved in De­cem­ber-Jan­uary, they con­tinue to be down by 10-15% from nor­mal lev­els. Video­con CEO CM Singh said the tax ben­e­fit is also ex­pected to widen the in­come tax net and more peo­ple to dis­close their in­come. This will ul­ti­mately lead to pen­e­tra­tion of con­sumer fi­nance in small mar­kets. The in­dus­try feels if that hap­pens, the av­er­age trans­ac­tion size for durables in these mar­kets will dou­ble to .₹ 20,000.

A sec­tion of the in­dus­try, how­ever, feels that pur­chases of durables will get a boost only af­ter two-three years, once the in­fras­truc­tural boost and ru­ral in­come up­lift take shape. “But then it is an op­por­tu­nity and the in­dus­try will be gear­ing it­self up by ex­pand­ing dis­tri­bu­tion and launch­ing rel­e­vant prod­ucts for these mar­kets,” said Pana­sonic In­dia pres­i­dent Man­ish Sharma. Deloitte Hask­ins & Sells part­ner Anil Tal­reja said: “The Bud­get pro­pos­als have been en­cour­ag­ing to play­ers in the con­sumer busi­ness space.”

launch small packs of ex­ist­ing brands like Dabur Red tooth­paste. It is ex­plor­ing prod­ucts tar­get­ing the ru­ral con­sumer in cat­e­gories like hair oil

TVs, refrig­er­a­tors and wash­ing ma­chines too said they will step up launches, pro­mo­tions and dis­tri­bu­tion of en­try-level prod­ucts

to spend more on the ru­ral side with an aim to dou­ble the farmer’s in­come in 5 years

in­come tax rate tar­get­ing mainly the small tax pay­ers and in­fra­struc­ture devel­op­ment will pro­vide mul­ti­ple growth driv­ers for the hin­ter­land

maker of the Para­chute hair oil, plans to step up pro­duc­tion of low-priced packs, cost­ing 2-10, across cat­e­gories

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