Sep 9, 2011|
The emerging rural consumer
The consumption pattern in rural India is slowly transforming from being experimental or occasional to being an indulgent one. As per market research agency Nielsen, one third of rural India is consuming biscuits for breakfast whereas one in every six rural consumers is indulging in hair colours. Consumer products like biscuits, edible oils, snacks, hair oils and shampoo which hitherto were urban centric are now witnessing faster growth in the hinterland. Rural India is calling the shots in more than half of the largest consumer good categories. The faster growth is not limited to penetration alone but the frequency of consumption is also growing reflecting sustained growth in rural market for these categories.
Strong rural demand in FY11
This is what the numbers say...
||Rural contribution to
category sales (%)
|Value sales growth (%)
|Refined edible oils
The demand boom in rural India has been catalyzed by the increased purchasing power. Factors such as farm loan waiver, better value of agricultural produce and government sponsored employment programs have translated into higher rural income. As per the National Sample Survey, the monthly per capita expenditure in rural India reached Rs 953 in 2009-10; a rise of 64.6% as compared to 2004-05. The growth in expenses outpaced the 57.6% rise in consumer prices over the same period, pointing to improved living standard of rural India.
Nielsen has projected the size of the rural market to grow ten folds to USD 100 billion by 2025. Fast Moving Consumer Good (FMCG) companies are capitalizing on the vast rural potential through wider distribution network in villages and increased launch of products in "Low Unit Packs"(LUP). The advent of LUP has widened the ambit of FMCG categories by attracting consumers who want to consume premium or impulse branded goods without hurting their pockets.
However, for the first time in three years demand momentum for consumer goods in rural markets lagged behind the urban markets during the period April-July 20011. The value growth in categories such as shampoo, hair-oil and toothpastes was slower in rural markets as compared to the urban markets. The FMCG companies attributed the sluggish growth in rural sales to the possible down trading to cheaper products or small packs as inflation continued to chip away purchasing power.
The slowdown in rural offtake is short term as future drivers continue to remain favourable. Backed by robust kharif harvest on forecasts of an almost normal monsoon and continued government thrust on agricultural credit, rural demand is likely to be back in action.
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