The Hindu Business Line : ... FMCG cos worried over delay

But last year, rural demand remained flat due to an erratic monsoon and a dampened sentiment; the 4-per cent growth in the FMCG segment was almost entirely generated through sales in the urban markets.

With indications that this year too the monsoon will be slightly delayed and rural demand failing to pick up in the first five months of the year, FMCG companies are working out ways to achieve their growth targets largely through the urban markets.

Dabur India Ltd appears resigned to the fact that rural demand may not pick up this year too. The Vice-President, Sales, Mr S. Raghunandan, told Business Line, "If indications available in the first five months of this year are anything to go by, rural demand is still stagnant. We have done whatever we could to attract the rural consumer, such as introduction of sachets and price corrections last year. This year, our focus is the urban consumer."

He said Dabur has, in fact, formed a special sales force to deal with `modern trade' (retail formats such as discount stores and hypermarkets), which is showing a healthy growth in the urban markets.

"Our research shows that urban growth is concentrated in large towns where modern trade is mushrooming. The consumer here wants large pack sizes, is more literate and aware of product features and demands promotions," said Mr Raghunandan.

At present, 3 per cent or about Rs 1,500 crore of FMCG business comes from modern trade, he added.

Disagreeing with him on the importance of the rural consumer for FMCG companies, the President of Wipro Consumer Care and Lighting, Mr Vineet Agrawal said, "For us, generating good rural demand is not an `either-or' issue. Rural markets are very important for us. A bad or delayed monsoon will certainly affect demand, with margins getting under pressure, but we are not abandoning the rural markets."

He said many of Wipro Consumer Care's products were focused on the rural market. For example, almost 55 per cent of the flagship soap brand Santoor's sales is from the rural areas.

The Chennai-based CavinKare Pvt Ltd is in a similar situation, with a strong rural focus. For Chick, the company's flagship shampoo brand, 65-70 per cent demand is from the rural consumers.

The Executive Director and CEO, Mr K.S. Ramesh, said his company has created an exclusive field force to focus on modern trade but was not in any way de-focusing from the rural markets. "In fact, we still believe that the monsoon will be normal this year and our 25-per cent volume growth target across base brands will be met," he said.

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