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Rural markets help makers of consumer goods grow steadily

Rural markets help makers of consumer goods grow steadily
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First Published: Mon, Aug 10 2009. 11 35 PM IST

In recent years, the list of states where growth has exceeded 10% a year since 2006-07 also includes Orissa, Chhattisgarh and Uttarakhand. Ahmed Raza Khan / Mint
In recent years, the list of states where growth has exceeded 10% a year since 2006-07 also includes Orissa, Chhattisgarh and Uttarakhand. Ahmed Raza Khan / Mint
Updated: Mon, Aug 10 2009. 11 35 PM IST
One sector that continued to gain steadily despite the economic slowdown was the market for personal and home care products. A reason for bucking the trend was these companies have discovered rural markets, which now contribute a little more than half the total sales for such products in the country.
States where sale of personal and home care products is high are those with either higher incomes or large populations. Maharashtra has the highest share of 16%, with high disposable incomes in the Mumbai-Pune belt and a large population. Andhra Pradesh is second due to its rapid growth in urban incomes, along with West Bengal, where population along with steady income growth in the 1990s is the predominant factor for high sales. Uttar Pradesh, the most populous state, comes in at fourth with 8% share of the market.
In recent years, the list of states where growth has exceeded 10% a year since 2006-07 also includes Orissa, Chhattisgarh and Uttarakhand. Ahmed Raza Khan / Mint
District-wise analysis shows that the largest concentrated markets for these products are naturally in the large metros or their suburban districts. But Medinipur in West Bengal, on account of its large population, stands out. The other is Surat in Gujarat, which also has a rapidly growing population as well as income. Both are easy entry points for sales networks.
In recent years, the list of states where growth has exceeded 10% a year since 2006-07 also includes Orissa, Chhattisgarh and Uttarakhand. But these markets are still small. Gujarat, on the other hand, is a large market, and also tops growth performance.
The main reasons for the growth in rural areas in the recent past have been improved incomes, good monsoons and the government’s rural employment guarantee programme, among others. As rural markets have now been perceived as untapped high-potential markets, firms are adapting their distribution networks and marketing strategies to increase rural penetration.
Traditionally, rural incomes and expenditures show high volatility due to the vagaries of rainfall which determines most of India’s farm output and volatility in prices of farm products. But this is changing slowly but steadily.
Agriculture is increasingly accounting for a lower share of rural incomes. Repatriations from migrants, increased role of the services sector and an increased role of unorganized and organized manufacturing are steadily chipping away at the overall share of agriculture incomes in rural areas.
Also, government interventions such as the National Rural Employment Guarantee Scheme—the government’s flagship welfare programme that ensures 100 days of employment to a member of a poor rural household—greater agriculture credit, increased role of groundwater for irrigation and government purchases of farm products at predetermined prices have helped in reducing volatility in rural incomes.
Rural households today depend on more than one source for their incomes. An individual may work in a farm or at a construction site or migrate to an urban area temporarily. Other individuals within the household may be involved in home-based work. This diversification helps stabilize household purchases.
However, agriculture incomes still have large enough multipliers in rural areas to affect rural purchases of personal and home care products. The current monsoon has not yet showed all its cards, but it has held back enough for the makers of these products to be concerned.
Demand Curve is a weekly column by research firm Indicus Analytics Pvt. Ltd on consumer trends and markets. Your comments are welcome at demandcurve@livemint.com
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First Published: Mon, Aug 10 2009. 11 35 PM IST