Fast-moving consumer goods (FMCG) companies are seeking a deeper foothold in the rural areas as part of a broader strategy to regain volume growth in the coming months.

Homegrown packaged consumer goods firms such as Marico Ltd and Dabur Ltd are either expanding their reach or looking for ways to improve the quality of their existing distribution network in the rural areas besides launching smaller and lower priced packs to target rural consumers.

Rural consumption has significantly slowed down in the past year impacting the sales volume growth of consumer goods companies. FMCG sales volume in rural areas fell 2% while urban sales volume fell 1% in the 12 months ended 31 May, according to research firm Kantar Worldpanel.

The growth is likely to remain subdued over the next two quarters because of the current liquidity crisis and weak monsoon in some parts of the country, according to analysts.

Dabur, which sells products such as Vatika shampoos and Real fruit juices, is ramping up its rural footprint by strengthening sales presence and retail network even as it continues to make smaller pack units to drive demand.

“At the distribution end, our investment in expanding Dabur’s rural footprint is a key growth strategy," said Mohit Malhotra, chief executive officer (CEO), Dabur. The company added 4,000 villages to its rural network to take the tally to 48,000 as on 30 June.

“We plan to expand this to 55,000 villages by the end of the fiscal year," Malhotra said, adding that the network will be expanded further to cover 62,000-65,000 villages by March 2021.

Rural areas now contribute 45-47% to Dabur’s revenue.

For Mumbai-based Marico, the makers of Parachute brand of hair oil and Saffola edible oil, improving the quality of the distribution network in rural areas through automation and direct sales rather than completely depending on wholesale retailers is of prime importance, said Saugata Gupta, CEO, Marico.

“Companies with direct rural distribution are likely to have competitive advantage in the long run and perhaps grab market share. Because of the ongoing liquidity crunch, wholesale as a channel is constrained," Gupta said.

Marico has close to 3 million stores and around 1,400 sales personnel in rural areas, according to market researcher Nielsen.

Companies that have more direct reach have performed better than others during the slowdown, said Sagarika Mukherjee, vice president, (consumer and media), Elara Capital.

“Everyone is trying to reach out to more outlets directly. Post GST, wholesale has almost gone out of business. You have to reach out to outlets that were serviced by the wholesalers through the direct reach," she said.

Emami Agrotech Ltd, which sells the Emami brand of edible oil, plans to add 100,000 retail outlets to its rural network by the end of this year and also launch smaller packs of existing products. Emami products are available in up to 150,000 stores in these areas.

“While we believe growth will recover in the nest six to nine months, we are trying to expand our reach to wherever we can and also focus on low-end packs," said N. Krishna Mohan, director, Emami Agrotech.

A spokesperson with ITC Ltd said the company’s overall network is being expanded to add new markets and outlets to accelerate growth. At present, the company’s distribution network comprises around 6 million retail outlets.

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