Fast-moving consumer goods (FMCG) companies can rejoice as the Rs 27,369 crore rural market in the country registered a growth rate of 17 per cent in the first 10 months this year.
About 34 per cent of the offtake for FMCG products came from rural areas. FMCG companies are trying to tap the rural market with more vigour, given the fact that nearly 70 per cent of the country's population lives in villages.
The estimated number of households that are using FMCG products in rural India have grown from 13.6 crore in 2004 to 14.3 crore in 2007. This growth was achieved on an average year-on-year growth of 1.8 per cent in the number of households, which use at least one FMCG product.
For some FMCG categories, the penetration levels have remained stagnant over the past three years. In others, the growth has been faster.
A study by market research firm IMRB International shows that while the monthly consumption categories comprising detergents and toilet soaps have remained largely stagnant with a 92 per cent penetration, categories such as liquid shampoos have grown from 68 per cent in 2004 to 83 per cent in 2007. Moving to higher-value products seems to have happened across categories, from toothpowder to toothpaste or from unbranded to branded products.
Manoj K Menon, senior project director, IMRB International (media and panel group), says, "One of the most significant changes, includes growing preference towards branded products. For example, in the food and beverages segment, penetration of branded atta has gone up year-on-year by 8 per cent and branded salt by 3
FMCG companies Hindustan Unilever and ITC have worked on increasing rural penetration through corporate social responsibility projects such as Project Shakti and e-Choupal, respectively.
According to Vijay Sharma, head, Project Shakti, the growth in sales from the rural market has been both in value and volume terms.
Speaking about his experience of the rural market, he said, "Through Project Shakti, the company has been implementing programmes that aim at building the market by increasing usage of the categories it is present in. The key here is to educate consumers about improving their lifestyle and our brands play a role in enabling this. For example, Lifebuoy Swasthya Chetana is a rural health and hygiene educational programme. Our Shakti network is growing and the company expects to cover 600 million consumers across 5 lakh villages through one lakh Shakti entrepreneuers by 2010."
Currently, Shakti has 45,000 entrepreneuers in the country.
Suchitra Potnis, associate director, Client Solutions (a Nielsen company), said, "Store density in rural India is 5.4 stores per thousand persons compared with 10.1 in urban areas. The top-20 categories account for around 70 per cent of the FMCG market. Categories such as batteries and iodised salt have gained a slot among the top-20 in the rural market since the consumption of these categories is higher in rural than urban India."
