Source: LiveMint.com, Nov 12, 2020
Consumer goods companies are ramping up distribution in India’s smaller towns and villages, where sales are rising thanks to reverse migration, increased minimum support prices, government stimulus measures for the rural economy and a normal monsoon.
Companies are trying out new pack sizes, leveraging online sales, and customizing products to expand their reach in the hinterland.
“We are appointing more distributors to enhance our rural reach. We are also appointing a lot of village-level entrepreneurs so that when the village sales scale up, we are able to convert them into sub-stockists and it becomes a part of our distribution network,” said Mohit Malhotra, chief executive officer, Dabur India Ltd. The company aims to reach 60,000 villages by the end of this fiscal, up from 52,000 in March 2020.
Jyothy Labs has rolled out ₹10 and ₹5 packs of its more urban-oriented dish cleaning brand Exo in villages and ensured last-mile supplies of its products. “Rural has been our strength from Day One. Now we’re putting more effort, appointing more sub-stockists, getting more distribution points and retail outlets and delivering at their doorsteps,” said Ullas Kamath, joint managing director, Jyothy Labs. Rural brings 40% of sales for the maker of Ujala fabric whitener and Pril utensil cleaners.
Growth in India’s villages, which account for over 36% sales for makers of fast-moving consumer goods, had slowed in 2018, pulling down overall growth for the entire industry.
Rural markets with their large population and consumer graduation from unbranded to branded and packaged goods have long been seen as a significant reservoir of growth for companies.
While the lockdown initially disrupted supplies for several companies, it also stoked demand for hygiene products and packaged foods in India’s villages. With the pandemic forcing people to return home —from big cities to smaller towns and villages—tier II, tier III towns and villages saw good traction for consumer goods.
Dabur’s Malhotra said rural demand trends will sustain for some more time, a commentary most large packaged consumer goods firms including Hindustan Unilever have maintained.
Packaged foods and beverage maker PepsiCo India has listed its products on Grameen e-store, a hyperlocal e-commerce platform for villages and enables last-mile delivery. For this, it partnered with common service centres (CSC) under the ministry of electronics and information technology (MeitY). Brands such as Lay’s, Kurkure and Uncle Chipps will be available on the Grameen e-store.
Raju Pullan, senior vice-president, consumer electronics business, Samsung India, said it is already seeing strong demand from tier-III cities as first-time buyers who typically travel to larger cities to buy big-ticket items purchase TV sets and washing machines locally. In response, Samsung has ensured availability in these markets.
“We will continue to focus on the nearby stores because consumers are willing to buy products from such stores,” said Pullan.
“Why we are seeing rural is growing is because one of the best harvests of wheat has been seen this year. Second, this is one of the best monsoon years. Third is government push towards rural—which is minimum support pricing and rural infrastructure. And fourth is efforts by organizations—whether it is rural-oriented packs or other distribution efforts by manufacturers,” said K. Ramakrishnan, managing director at Kantar Worldpanel, which tracks FMCG consumption.