Rural market at inflection point offers headroom, long-term potential for growth: Marico MD & CEO

Mumbai: The "aspirational" rural market is at an "inflexion point”, which offers significant opportunities and long-term potential to the FMCG companies with price point packs, said Marico M D & CEO Saugata Gupta.

The hinterland, with its large population base and rising disposable income offers 'headroom for growth' for FMCG as people there now aspire for the same brands of products as other markets Gupta told PTI.

Per capita income is on the rise, helped by the government’s spending on infrastructure, and an increase in the minimum support price of crops, which has helped in a significant uplift in terms of quality of life for the rural class, he said.

"So, I believe that this is an inflexion point,” said Gupta adding "for the large FMCG players this is an opportunity to continue to invest in rural because if you really look at it, everybody is chasing that same urban consumer whether it's D2C brands or international brands.” Marico is present in the rural markets with price point packs and Gupta believes “if you invest ahead of the curve, it has far more long-term potential and headroom for growth.’ However, he also added that "affordability and availability” will always remain an important aspect for those markets.

"Affordability is driven by price point packs. Availability is driven by distribution because sometimes otherwise there are counterfeits of your brand is not available” he said adding now "Bharat is aspirational, Bharat is ambitious and, therefore, we have to continuously best play the rural".

Gupta further added that rural distribution is still a source of competitive advantage for FMCG companies.

“There are still huge entry barriers which are not there in top eight cities through modern trade and, therefore, it makes significant sense to continuously invest in rural infrastructure, rural distribution and create moats for large FMCG companies,” he added.

In the December quarter, rural markets have again surpassed the urban market in terms of growth. This was the fourth consecutive quarter, in which the rural beat the urban market in terms of growth, though on a smaller base.

Marico, which is having a sequential volume growth, said urban consumption is relatively softer between the second and third quarters and is ’stable” now.

Historically rural demand has been rising twice the rate of urban areas, but on a lower base, driven by over 800 million people whose purchase behavior is mostly linked to farm output.

Moreover, over the growing debate between General Trade (Kirana stores) and Quick-Commerce, which has disrupted the market with its fast pace of growth, Gupta said the traditional retail channels will “coexist” with the new age channels.

However, Gupta also added each channel plays a “certain role with a ceratin catchment area” as GT is stronger in the smaller towns and rural markets, while online sales, which include e-Com and Q-Commerce, are driving premiumisation and diversification of Marico’s portfolio.

He highlighted the role of having differentiated offerings in the channels to stop overlap.

"Obviously, if you sell the same thing, there will be cannibalisation. The second thing which is important is, you need to have a different portfolio and also need to have a minimum operating price operating each channel so that it does not lead to channel conflict,” he said.

Gupta also added as a responsible FMCG player, “we should also ensure that we do not over discount in one channel so that the other channel suffers” and ensure that there is at least, to a large extent, exclusivity of packs to the extent possible.