FMCG in India- Going Back to The Roots
Ok, that’s it. The time has finally come for me to pack my bags, bid adieu to the 12-13 readers I have (hopefully), and head straight for my ancestral village in distant Bihar to give myself one last shot at entering the millionaire league. You see, apparently, that’s where all the money is nowadays, with the big city holding out few prospects of any real material gains while our country cousins continue to rake in the moolah, and  making sure all of us know while they are at it. As if the news of a bunch of businessmen from sleepy Aurangabad booking 113 Mercedes-Benz cars wasn’t bad enough, it now emerges that another bunch of businessmen from the equally sleepy Kolhapur and Sangli areas of Maharashtra have placed an even bigger order of 180 Mercedes-Benz cars. Even before the ink could dry on the latest instance of rural India showcasing its ever rising spending power, I could see the last smidgen of self-worth slowly vaporizing into thin air, as I painfully reflected upon my daily travails in the humble auto, in spite of the highly urban credentials I undoubtedly possess(  can show you my certificates). Given such a state of affairs, heading back to my roots  makes eminent sense, besides being my only real hope of graduating beyond a three-wheeler in this life-time. And not too surprisingly, it seems I am not the only one heading back home. With the increasing purchasing capacity of India’s rural masses coming to the fore, the new target for MNCs and domestic firms alike is no longer the upper middle class, corporate hotshot sitting inside his air-conditioned drawing room in upscale Gurgaon, but instead, the spotlight is increasingly on his dhoti-kurta clad, hookah firmly in mouth, country cousin found in the dusty by-lanes of the not-so-distant Hissar.
At 150 million households, rural India offers three times the customer base that its urban counterpart can ever hope to offer, with the additional promise of growth opportunities that can no longer be found in our urban centers. As per an analysis carried out by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), the Fast Moving Consumer Goods (FMCG) sector will be witnessing more than 50% of growth in its Rural and Semi-Urban Segments by 2012, which in totality is projected to grow at an CAGR of 10%,to carry forward its market size to over Rs.1, 06300 crore from the present level of Rs 87,900 crore. The report goes on to point out that the FMCG products which will attract the eyes of rural and semi-urban folks will mainly comprise cold drinks, consumer durables, batteries, biscuits, namkeens, mosquito repellants, refined oil, hair oil, toothpastes, soaps and detergents.In the semi-urban areas, which  includes townships of larger sizes, the spurt in the number of malls to be put up over the next 2-3 years will see large volumes of FMCG products being sold, thereby increasing their demand phenomenally. Some of the companies expected to rake in the benefits include Godrej, Britannia, Coca-Cola, Pepsi, HLL, Dabur, ITC etc, to name just a few. And it’s not just about the numbers alone. With the average urban Indian’s growing penchant for health-conscious, organic alternatives that are not currently available with most FMCG firms, the industry will have to increasingly look for a larger market size in the rural and semi-urban areas in the years ahead to keep their cash registers ringing.
However, it’s not all going to be smooth sailing as far FMCG sector’s sojourn into the hinterland is concerned. Though the rural and semi-urban demand of FMCG products will grow larger and higher, it will simultaneously exert severe pressure on the margins of manufacturers of FMCG products, given the cut-throat competition that is such an integral feature of the Indian market. With arguably the most price-conscious customers found anywhere in the world, selling that packet of ultra-refiined hair oil will be no easy job. As anyone who has paid a visit to the neighborhood kirana store would testify, the bargaining/haggling skills of the Indian housewife- for long, the subject matter of case studies at Harvard University- are more than sufficient not to get taken in by the spiel your marketing genius may have to offer, no matter how high his GMAT score may be. Urban  market or rural, try fooling Mrs. Sharma, and you might just end up packing your bags with me.

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