Rural markets in India play an important role for FMCG companies to stay relevant
FMCG is the 4th largest sector in the Indian economy where the urban segment contributes about 55% to the overall revenue generated by the sector. However, with internet penetration, growing awareness, increasing income and changing lifestyles, the FMCG market has seen faster growth in rural India as compared to the urban counterparts. FMCG products are reported to account for 50% of the total rural spending which is proof of the rapid growth in the semi-urban and rural consumers in the industry.
This massive growth of the rural market in India has shifted the marketable battlefields for the FMCG companies from urban to rural. The rural market today is offering unlimited opportunities to the businesses to reach out to nearly one-third of the county’s population. Internet penetration has made information accessible for the Indian rural consumers which is influencing their purchase decisions. The focus of these consumers is shifting towards value-based purchases instead of price-based buying. They are now considering price in comparison with utility, value, and features of the products. Companies which earlier treated the rural market as a clearance ground for their lower end products are now realizing the need to focus on the requirements of the rural customers.
Digitization Is Propelling The Demand
Digitization is propelling the demand for FMCG products in rural India and easy internet access is providing a cheaper and more convenient way to increase companies’ reach. Online portals are increasingly becoming the key channels for companies trying to penetrate the hinterlands. Using the power of the internet, companies are looking to spread their reach by overcoming geographical barriers. The online FMCG market is, therefore, estimated to reach US$ 45 billion and around 40% of all FMCG demand in India is forecasted to come from online sources by the year 2020.
High Demand From Rural Areas
About 70% of the population in India resides in remote corners of the country and this rural population consumes around 60% of the total manufactured goods, especially products coming from the FMCG sector. Most of the big players in the sector have come up with strategies to tap the unlimited potential that Indian hinterland is offering. HUL, for instance, started ‘Operation Bharat‘to enter the rural markets by introducing low–priced sample packets of its products to reach about twenty million households. The company’s rural revenue accounts for about 45 per cent of its overall sales and similarly, Dabur generates over 40% to 45% of the domestic revenue from sales in the rural market.
Paving the way for businesses
Increased rural consumption is steadily leading to higher demand for branded products in rural India. The rising level of brand consciousness has paved the way for growth in modern retail. The rural FMCG market in India is expected to grow from US$ 23.6 billion in FY18 to US$ 220 billion by 2025. Given the changing consumption pattern and the potential market size, rural India is undoubtedly a lucrative opportunity that no FMCG company would like to miss.
“The heart of India lies in its villages, and today it is almost impossible to succeed in business if we leave the county’s rural population behind. Companies, especially in the FMCG sector, need to understand the dynamics of the burgeoning rural market and come up with innovative strategies to win the trust of these potential consumers and to stay relevant in the market.”
This Article is Written By Ghazal Alagh, Co-Founder, Mamaearth.