Rural markets have become an engine of growth for large packaged goods companies including Hindustan Unilever, Marico and Dabur among others, over the last three quarters, as parts of urban markets are still reporting muted growth
New Delhi: Upbeat on growth in rural markets, major fast-moving consumer goods makers are shoring up efforts to get more distributors and stockists on ground in India’s smaller cities and villages. This could lead to a rise in hiring by up to 25% this year, said temporary staffing firms.
“There's definitely an uptick in hiring, specifically for the frontline people," said Balasubramanian A, business head, clients, TeamLease Services.
Large consumer goods companies typically work with thousands of distributors across the country and each distributor further has a posse of sales staff.
Expansion for most fast-moving consumer goods companies happens on the back of a new distributor or a super stockist—that works in a certain territory and ensures access of products to various retailers in the area, said Balasubramanian.
Rural markets have become an engine of growth for large packaged goods companies including Hindustan Unilever, Marico and Dabur among others, over the last three quarters, as parts of urban markets are still reporting muted growth.
India’s villages that constitute 36% of sales for FMCG firms, were in a slump in 2019. These markets, however, reported strong growth in the first quarter of the current financial year helped by reverse migration, favourable government schemes and normal monsoon last year.
Reverse migration has also helped move consumption trends to India’s smaller cities helping in brisk sale of packaged goods, Balasubramanian said.
As a result, for most companies, rural demand continues to march ahead of urban.
Jyothy Labs said sales in rural markets grew upwards of 15% in December quarter, while urban markets reported 7-8% growth.
Marico Limited, on the other hand, reported a 24% growth in rural volumes in general trade in the December quarter. The company has added more stockists in India’s villages. Its rural distribution could go up 20% over the next few years, said Sanjay Mishra, chief operating officer, India sales and chief executive officer, new business, Marico Limited.
“For Marico, rural has been a growth engine for the last 2-3 years, which has been further accelerated in the past 12 months. In Q3FY21 alone, general trade has witnessed a 24% growth in volume terms in the rural market," he said.
Further, Marico's continued focus on expanding direct distribution enabled the company to develop a wide network of stockists in the rural market. "We have added 30% new stockists over the last two years. This growth has been driven through different go-to-market models such as super distributors, including stockists as well as ready-stock van units. Going forward, we will also experiment with various different models to penetrate deeper into the rural markets, with an aim to grow the network by 20% in the next couple of years," said Mishra.
Biscuit maker Britannia Industries added more distributors in rural markets after the lockdown-led disruptions impacted trade. The company has been steadily growing its access in rural areas. Between March 2020 and December 2020, the number of rural preferred dealers, as the company calls them, were up from 19,000 to 23,000.
“….our rural distribution is solid, we've again put on more distributors in rural areas. I think during the covid period, there was irregularity of service from our distributors because of obvious reasons. But now, we've brought the discipline back into place, we made sure that supervision is happening, and execution is happening as per the norms set by us, and we are now back to a very solid 23,000 rural distributors," Varun Berry, MD, Britannia Industries said during the company’s post-earnings call this week.
Packaged foods company Capital Foods said it is stepping up last-mile delivery by partnering with stockists and distributors in focused regions as demand for its Schezwan Chutney, Ching's Hakka Noodles, sauces, etc grew across the country, including in tier 2 and 3 markets in the last year.
“Following which there has been a strategic focus on expanding production capacity by adding manufacturing units and strengthening our distribution network across India," said Navin Tewari, MD and CEO, Capital Foods Pvt. Ltd.
Snacking company Prataap Snacks recovered 96% of business in the December quarter on the back of better rural reach. “We have almost caught up with last year. That is primarily because we have penetrated deeper in smaller towns and rural" said Subhashish Basu, chief operating officer at the Indore-based company.
Basu said urban centres remain weak due to restrictions on colleges and schools. The company is further deepening reach in rural pockets. “It will help us to create some cushion for the shortfalls we're getting from the top urban centers," said Basu.
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