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As Income Is Shrinking, Rural India Opts For Smaller Packs Over Big Ones

Pritish raj by Pritish raj
February 17, 2020
in FMCG, News
3 min read
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FMCG Giants Companies Rural India Small Packet- Next Big Brand

Rural India Small Packet- Next Big Brand

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  • Rural India is becoming more tight-fisted, opting for smaller and cheaper packs of detergents and toothpaste, as declining sales push them to cut spending.
  • Market researcher Nielsen said growth in rural India slowed from a strong 16.2 percent in 2018 to 8.8 percent in 2019. The overall value of the FMCG market rose by 9.7 percent in 2019

According to consumer goods firms, rural Indians are becoming more tight-fisted, opting for smaller and cheaper packets of detergents and toothpaste, as declining sales push them to cut spending.

The seller of Henko detergent and fabric whitener Ujala, Jyothy Laboratories, said the selling of packs costing as much as 10 has significantly increased in rural markets.

Marico Ltd, a packaged goods firm, said customers seeking cheaper alternatives may have affected rural market sales of their value-added hair oils.

“Rural continues to be bad— we’ve seen it for six-seven quarters,” said Ullas Kamath, Joint Managing Director of Jyothy Laboratories. “Our upper 10 detergent packs are now nearly 40 percent of the market. Normally, they shouldn’t be more than 20 percent. The 3 kg detergent pack has now fallen from 20-30 percent to 10 percent.

Industries also experienced a downturn in daily-use goods growth rates in both urban and rural markets. For rural areas, however, the burden is more pronounced, contributing 36 percent to total FMCG revenue, and has grown faster than urban markets traditionally.

This was confirmed by market researcher Nielsen, who said growth in rural India slowed from a strong 16.2 percent in 2018 to 8.8 percent in 2019. The overall value of the FMCG market rose by 9.7 percent in 2019.

According to Dabur India chief financial officer Lalit Malik, inexpensive packs are doing well in the rural markets. Real juice maker and Vatika hair oil have expanded its product basket on the rural market by launching more affordable packs. “Recent quarters have seen us introduce low unit packs in food, hair oils and oral care categories,” said Malik.

Following the results of the quarter in December, Marico said the risk of downtrading from branded to unbranded hair oils could have impacted sales of its value-added hair oils portfolio as households choose cheaper alternatives.

Its core brand Parachute decreased by 2% in terms of volume, while value-added hair oils decreased by 7%.

Managing director and CEO Saugata Gupta said in Marico’s earnings call it was seeing a reverse migration trend, where consumers could move from branded to unbranded hair oil. He added that in times of a slowdown in consumption, “the unbranded to branded (trend) that has driven category growth has slowed significantly, and reverse migration has occurred in some markets.” Companies have taken steps to survive the slowdown by increasing their direct reach in villages and adding smaller packages for key brands.

By increasing their direct reach in villages and adding smaller packs for key brands, companies have taken steps to survive the slowdown. In the third quarter, in response to the muted demand for personal and home care products, Jyothy Laboratories reduced its inventory, Kamath said.

Dabur’s Malik said his firm has invested in building its direct rural footprint by expanding its sub-stockers network. Its rural reach has also increased from 44,000 villages in March 2019 to more than 51,500 in December 2019. “This lets us move ahead of urban our rural sector,” Malik said.

Others said that while downtrading instances were not visible in their commodity portfolio, they used more targeted marketing and promotional campaigns to boost growth. “We have a strategic, focused approach to conquering micro-markets,” said Sunil Kataria, Godrej Consumer Products Ltd’s CEO-India and SAARC. Cinthol soaps manufacturer and Good Knight mosquito repellents said they have been working on data and analytics to define and segment micro-markets for their brands over the past few years.

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Pritish raj

Pritish raj

Pritish Raj is a content writer at Next Big Brand. Hailing from the diversified state of Bihar, he is an engineer by education who chooses the way of poetry, photography, and writing to kick off his career. Highly enthusiastic about brands and startups, he aims to be a travel content creator.

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