FMCG companies eye small town move
Packaged goods companies are increasing their focus on rural and non-metro markets, where a demand rebound is expected to strengthen over the next six months, market researcher Nielsen said in a report on Friday.
“As metros are more impacted by the incidence of Covid and reverse migration, rural and middle India are driving growth and hence, the industry is focusing on these growth pockets,” said Diptanshu Ray, retail intelligence, South Asia, Nielsen Global Connect.
Most fast-moving consumer goods (FMCG) companies said that rural and small towns are driving growth, according to a survey of 14 top executives of FMCG and retail companies by Nielsen in September.
“The majority of the top executives that we interacted with in September said they would focus more on middle and rural India. Though some said metros remain important because of the contribution and the presence of competition, very clearly middle and rural India will be a high focus from the planner’s and executor’s standpoint,” said Sameer Shukla, executive director, Retail Intelligence, South Asia, Nielsen Global Connect.
India’s top metros account for 30% of overall sales by value for FMCG companies, while rural areas contribute to 38%. “FMCG consumption was the hardest hit in bigger cities in India during the lockdown period, the impact was the least in villages that retail close to 40% of industry sales,” the report said.
Given the favourable monsoon this year, along with the government’s push on agrarian reforms to tide over the economic impact of the lockdown, FMCG companies are likely to perform better in rural India, Shukla said.
Rural markets have lagged behind urban for more than a year between 2018 to 2019. In fact, in the September 2019 quarter, rural India grew at the slowest pace in seven years.
However, as the pandemic surged in India’s cities and people left cities to return to their homes in villages, the sales growth of packaged goods in these places has seen an uptick.
“There is definitely a strong tailwind for rural. Monsoon has been good and all those reforms in the agrarian economy is going to push rural growth,” Shukla said.
Shukla said manufacturers and distributors will have to expand their reach in the markets to capitalise on consumption.
Nielsen also reported a jump in e-commerce transactions in small towns with a population of less than 1 lakh. Value contribution of online sales from small-towns rose by 9% in May to August.