NEW DELHI : Rural Indians are getting more tight-fisted, opting for smaller and cheaper packs of detergents and toothpastes, as shrinking incomes force them to cut back on spending, according to consumer goods companies.

Jyothy Laboratories, the seller of Henko detergent and fabric whitener Ujala, said the sale of packs that cost 10 has gone up significantly in rural markets.

Packaged goods company Marico Ltd said that consumers choosing cheaper alternatives may have impacted sales of its value-added hair oils in rural markets.

“Rural continues to be bad—we have been seeing it for six- seven quarters," said Ullas Kamath, joint managing director of Jyothy Laboratories. “Our 10 detergent packs are now almost 40% of the business. Typically, it should not be more than 20%. The 3kg pack in detergent has come down from 20-30% to 10% now. That goes to say that people are buying only as much as they require—they are not putting extra money in buying large pack sizes."

Companies have been witnessing a slump in growth rates of goods for daily use in both urban and rural markets. However, the stress is more pronounced in rural that contributes 36% to overall FMCG sales and has historically grown faster than urban markets. This was corroborated by market researcher Nielsen, which said growth in rural India slowed to 8.8% in 2019 from a strong 16.2% in 2018.

In 2019, the overall FMCG sector grew by 9.7% in value.

Affordable packs are doing well in rural markets, Dabur India chief financial officer Lalit Malik said. The maker of Real juices and Vatika hair oil has been expanding its product basket in the rural market by launching more affordable packs. “Recent quarters have seen us introduce low unit packs in foods, hair oils and oral care categories," Malik said.

Post its December quarter results, Marico said a possibility of downtrading from branded to unbranded hair oils could have impacted sales of its value-added hair oils portfolio as households chose cheaper alternatives.

The company’s India sales volume fell 1% for the three months ended 31 December. Its core Parachute brand declined by 2% in volume terms, while value-added hair oils were down 7%.

In Marico’s earnings call, managing director and CEO Saugata Gupta said it was seeing a reverse migration trend, where consumers might be moving from branded to unbranded hair oil. He added that in times of a consumption slowdown, “the unbranded to branded (trend), which drove the category growth, has slowed down significantly and there has been a reverse migration in certain markets".

Companies have been taking steps to survive the slowdown by increasing their direct reach in villages, and adding smaller packs for key brands. In the third quarter, Jyothy Laboratories reduced its inventory in response to muted demand for personal and home care products, said Kamath.

Dabur’s Malik said his company has been investing in building its direct rural footprint by increasing its network of sub-stockists. Its rural reach has also gone up from 44,000 villages in March 2019 to over 51,500 villages in December 2019. “This is helping us drive our rural business ahead of urban," Malik said.

Others said that while instances of downtrading were not visible in their portfolio of goods, they have been using more targeted marketing and promotional campaigns to boost growth. “We have a strategic, focused approach to conquering micro markets," said Sunil Kataria, CEO-India and SAARC of Godrej Consumer Products Ltd. The maker of Cinthol soaps and Good Knight mosquito repellents said it has been working on data and analytics to define and segment micro markets for its brands over the last few years. The company is “doubling down on this approach during the slowdown and it is holding us in very good stead," Kataria said.

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