Rural Consumption(29!12!12)

7/28/2019 Rural Consumption(29!12!12)

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Rural consumption, new product launches

pumped up FMCG sector

Priyanka PaniShare Comment print T+

The year witnessed a transition from unbranded to branded consumer goods, which was the

biggest growth driver for consumer companies.A. Roy Chowdhury

Mumbai, Dec 27:

Despite weak consumer sentiment, rising input costs and inflation hovering at 7.24 per cent, thefast moving consumer goods (FMCG) segment came out unscathed in 2012. Overall, the sectorwitnessed a growth of 15-20 per cent this year.

ITC, Godrej Consumers and Hindustan Unilever were the star performers, according to analysts.The stocks were able to pull the overall sector through upward re-rating (an act of changing the

value of a share on the stock exchange, either upwards or downwards).

The other major players such as Marico, Emami, and Dabur witnessed healthy growth in terms

of revenues and bottom-line, which was largely pricing-led rather than volume. Most of thecompanies either increased prices by 4-5 per cent or reduced the grammage of the products to
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protect their margins, at the same time leading to down trading in several categories such as

edible oils, soaps, and packaged foods.

According to Nitin Mathur of research firm Espirito Santo, packaged food that grew at 15-20 per

cent in 2011 came down to 0-2 per cent this year.

packaged food items

Many consumers said that they cut down on packaged food items such as corn flakes, cereals,noodles, soups and chocolates. They also bought cheaper or value-for-money products as

slowdown continued to pinch their pockets.

There was pressure of slowdown all across the FMCG sector. Bottom lines were under pressure

due to an increase in input and other costs. However, the sector performed well compared to

other sectors, said N Krishna Mohan, CEO, Sales, Supply Chain and Human Capital, Emami

Ltd.

However, according to Maricos Chaitanya Deshpande, Executive Vice-President and HeadInvestor Relations, the rise in cost of raw materials saw some easing in 2012 as against previous

couple of years. Most companies were also impacted by lower ordering through the canteen

stores department channel, which usually contributes about 5-6 per cent to overall sales.

Rural consumption

The sector saw consumption in the rural economy pick up at a faster pace. The consumers there

were seen upgrading themselves to premium categories. That apart, both urban and rural marketswitnessed a number of new brands in the personal care categories.

There has been increased spending on skin, personal care and health care this year, across

demographics. The growth, at least for Emami, has been holistic with increased consumption

across the urban and rural markets. Consumption from rural India continued to be good and this

propelled strong volume and value growths, Krishna Mohan added.

New launches

For Marico, it entered the breakfast category by launching Saffola oats in various flavours. It

also launched new products in the hair care and skin care segments. The acquisition of Paras

Healthcare last year helped it extend into the male personal care business where it gained some

traction.

For Godrej, the growth came in from new channels, product innovation, and pollination acrossregions and expansion of the distribution network. New launches such as creme-based hair

colour and extension of Cinthol into categories such as face wash and moisturisers gave an added

impetus to the overall business. HUL also went in for extensions in brands such as Lux,

Pepsodent and Pureit.


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For Dabur, the year 2012 undertook a mega initiative to substantially expand its distribution

footprint and drive profitable growth. This initiative was aimed at doubling the direct distribution

reach in rural markets, customising trade promotions and providing focused servicing through adedicated sales team in these markets.

The year also witnessed a transition from unbranded to branded consumer goods, which was thebiggest growth driver for consumer companies. This, in turn, implied that the onus was on

companies to keep innovating and attracting new consumers to the category.

Field resources are being deployed in the deep hinterland in the high potential districts of these

States to establish networks for doubling rural coverage and considerably increase contact

frequencies. With this, our products are now reaching out to villages of 3,000 populations. Goingahead, we will continue to drive growth on the back of our distribution enhancement initiatives,

unique promotional activities and product innovation, said Dabur CEO Sunil Duggal.

For Dabur, categories such as health supplements, shampoos, foods, skin care and home care

reported strong growth during the year.

Meanwhile, against the backdrop of weak consumer environment, all consumer companies have

increased focus on advertising, which in turn, has led to increased media rates. Advertising cost

has increased by 20 per cent compared to last year.

On the sectors performance in the coming year, Espirito Santo said that 2013 would witness a

lot of activity in terms of mergers and acquisitions, as there has been less growth and companiesare sitting on huge piles of cash. It also said that next 2-3 quarters would see no volume growth if

the slowdown persists.

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Rural Consumption(29!12!12)