Food Leads The Way For Rural Demand Revival 

If you look at it from an FMCG standpoint, growth has been a little sluggish in the first half of the year. Overall, we are talking of close to 8 percent growth in terms of value, led largely by the food segment.

In the recent quarter essentially, again the same trend has played out. Rural, for a change has growing faster than urban first and foremost. Volume growth has been led by staples and food products, followed by home and personal care.

But in home and personal care the volume growth has been in low single digit to that extent. The volume growth has certainly happened, it is far sharper, far greater than the first quarter of the year, but, clearly led by food to that extent.

It takes a while for consumption to pick up. FMCG is a ‘habit forming’ sector, unlike an euphoria. From a FMCG angle, it’s a gradual play out, it’s a habit forming thing. When times are tough, particularly when you take rural demand, rainfall has been okay this year, but the prior two years have seen drought. That is why there has been a holding back.

From a personal care stand point, I think it is also consumers holding back. Food you don’t hold back, it’s a daily staple category and new users keep on coming into the category from unbranded to branded. Personal care is usually discretionary spends, and when times are tougher, it takes a back seat.

In terms of pricing, food actually because of inflation going down, pricing has been very very subdued to that extent. Most of the players from last year started offering promotional offers to a lot of consumers, just take into account how commodity prices went down. That has in fact, had a positive impact on consumption which is why in the food sector you can actually see consumption going up.

In personal care prices have certainly gone down, there have been more on promotions as well benefiting the consumer. If you look at the last two quarters, the increase in prices has not been to the tune of more than one and a half to two percent.

In the consumption space, mostly the personal care sector. These are discretionary ones. The ones which still are bellwethers are the food and the staples category. They benefit both from existing users continuing to do more and from new users coming into the category and switching from unbranded to branded.

Segments such as hair oil, and other segments such as over the counter products such as chyawanprash, honey, they seem to be benefiting from it.

Similarly, categories such as skin cleansing saw far more interest from consumers. Skin cream is another segment which has seen some momentum. Oral care is another segment which has seen some momentum of both herbal and natural products panning out far more.

It is not just a phenomenon of the last one or two quarters, if you were to just take a benchmark, if I were to take the FMCG growth rate on a CAGR (compounded annual growth rate) basis for the last four years, FMCG would have grown at 8.5 percent. If I were to take herbal, natural ayurvedic products combined as an entity, the same segment would have grown at 15 percent, which is two times the growth rate of the overall.

It is not just a new trend, it has been happening gradually over the last couple of years, it also shows how consumers have changed and evolved. Fair credit needs to be given to marketers, if you were to think about it, it is also about what innovation we bring into play, how do we also make consumers feel safe.

Some of these products are natural and beneficial to them and consumers try and adopt. I think the rate of trial and adoption has certainly increased, which is why this sector is seeing some sort of benefit and consumers lapping up some of these products.

If you were to look at this again, it is not very very new. The rate of acceleration has increased in this case. But, if you were to go back, five-ten years ago, there have always been natural ingredients within the toothpaste category. Whether you talk of Meswak from the erstwhile Balsara Group, now Dabur, to that extent or if you talk of Himalaya, some of these products have always been present. Salt in toothpaste has always been there.

The acceleration has been happening because of greater consumer adoption. Also, because marketeers are talking about it. So, the two together is making a difference.

Innovation in the category also plays a great role here. As the rate of innovation and new introductions keep on coming into the category, the consumer also tends to try new products. As the rate of trial increases, you also find people lapping it up. Some will stay on and some will elapse.

It’s not about fighting this trend, its also about being inclusive in the trend as I would put it. See, the trend is here to stay. This trend has been there for the last couple of years in any case. It’s a question of what is the unique and distinct proposition which each one of them are trying to bring in.

A lot of companies are bringing back their old products which consumers have used and have tried and tested in the past. Similarly, a lot of companies are also trying to innovate and saying can we do something differently in this space. Bringing in new innovations in new segments and new sectors for that matter.

I think, this rate of innovation is what is causing the change. So, if you were to put it, people are saying it’s a trend which we need to make a friend of ours rather than fight against it. That shift in mentality is also hitting the segment.

The segments are essentially the same. It’s the rate of change in terms of introduction and innovation that has changed over a period of time.