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Sunday, October 25, 2020

Companies launch new products at low price points, responding to pent-up demand

Data by research firm Nielsen last month said consumption growth in rural markets is expanding at double the rate of urban markets where overall growth in the FMCG segment is estimated at about 5% in the next nine months.

Bottom-of-pyramid or entry-level pricing is back as large companies respond to green shoots of pent-up demand, launching packs and new products at price points as low as 50 paise, Re 1 and Rs 2.50. Given that even sporadic lockdowns hamper business in cities, consumption growth from rural India is now outpacing urban demand riding on higher farm incomes and minimal retail disruption.

ITC, Dabur, Amul, CavinKare and Coca-Cola are among dozens of companies pushing newer and lower price points, backed by increased direct reach in rural markets and ahead of the curve investments. Industry executives said they are betting on lower price points and higher reach to swing demand in rural India, which has been relatively insulated from lockdowns, as they expect rural demand to drive the growth at a time when consumption in urban markets remains uncertain.

“Our farmer engagements, agri linkages and distribution reach are well poised to respond to emerging demand in rural India,” a spokesperson for FMCG-tobacco giant ITC said. At the forefront of the company’s five new launches during the lockdown is Savlon sanitisers at 50 paise.

“Savlon hand sanitiser sachets address the issues of accessibility, affordability and availability. We expect quick adoption of the brand by rural consumers as hygiene and immunity boosting products are now at the forefront of consumer demand even in rural markets,” the spokesperson said.

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Data by research firm Nielsen last month said consumption growth in rural markets is expanding at double the rate of urban markets where overall growth in the FMCG segment is estimated at about 5% in the next nine months.

“Aspiration levels in rural India have grown and the consumer there is seeking the same products as their urban counterparts, but at their price points,” Dabur Chief Executive, Mohit Malhotra said. To feed this growing network, the company has expanded its portfolio at prices lower than existing ones across categories including fruit drinks, toothpastes and hair oils, all of which have helped push demand growth, he said.

Companies are pushing the envelope to tap niches across existing and new categories.

India’s largest dairy company Amul, which sells milk, ice-cream, butter and cheese, added Panchamrit or packaged prasad offered in temples, across its parlours, retail counters and e-commerce platforms last week. Amul MD, RS Sodhi said the single serve packs of Rs 2.50 each are ‘reasonably priced’. “The product is affordable, has a shelf life of four months, does not require refrigeration, and it is getting demand from international markets,” he said.

Chennai-based CavinKare, which sells a range of hair-care and personal-care products, said it hopes to repeat its Re 1 sachet success in shampoo when it extended its Chik shampoo franchise to sanitisers priced at Re 1 last quarter. “We are a company born out of sachets; this is a product for consumers across rural markets as much as it is for urban consumers,” CavinKare Chairman, CK Ranganathan said.

Ratings and research advisory Crisil said while FMCG companies’ sales are expected to contract 2-3% in the current fiscal, rural India should fare better. It attributed the reasons to the government’s economic package, which stepped up allocation of funds under the MGNREGA by an additional Rs 40,000 crore and forecast of a good monsoon, among other reasons.

Beverages maker Coca-Cola, which has tied up with the Government-backed Common Services Centre’s Grameen eStore store to service rural markets, is working on stepping up entry-level pricing for its beverages. 

“Innovative ways to reach the consumer along with affordability will be important to drive demand; the partnership with CSC is aimed at promoting availability of beverages at doorsteps in rural India,” a Coca-Cola India spokesperson said. He named entry-level priced beverages such as Rimzim Apple Pop, Minute Maid Nutriforce, Maaza Refresh and Aquarius Glucocharge as examples aimed at rural consumers.

SourceET Retail
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