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Slowdown in urban demand is prompting Marico to take its premium brand Saffola to the rural markets. It is also prototyping a variant of its edible oil brand for these markets.
Room for growth
“Saffola has been restricted to the top 6-10 metro markets and does not have any rural distribution. Since there is headroom for growth in the rural markets, we are prototyping Saffola for this market with enhanced distribution as there is softening of urban demand,” said Saugata Gupta, CEO, FMCG, Marico, during an analyst conference recently.
The Saffola refined edible oil franchise grew by 7 per cent in volume terms this year compared with last year, which is lower than the company’s expectations.
While Marico does not believe that its consumers are down trading, there is deceleration in the rate at which new consumers are upgrading to the brand, which is leading to lower growth.
“FMCG demand at the top end of the category has slowed down and this is where Saffola operates. In fact, sales growth in the urban centric categories has gone down in the past 9-12 months. There is potential in the long term for Saffola in the rural markets and we expect it to contribute about two per cent additional growth for the brand,” added Gupta.
Currently, the rural markets contribute 35 per cent to Marico’s sales turnover. The company is currently test marketing its Saffola prototype in one State. It has also been steadily increasing its Saffola edible oil franchise with Saffola Total being its latest offering.
Considering there is softening of urban demand, Marico is keeping realistic expectations for its premium edible oil brand.
“In the next few quarters, we expect Saffola to grow at 10 per cent. We have created different variants and price points to get this level of growth for the brand. We would be happy to achieve 13-14 per cent in the future,” said Gupta.
There is also more scope for growth of its flagship brand Parachute from the rural markets.
“Our rural market share for Parachute is lower than the urban markets. The conversion from loose to branded coconut oil is higher in the rural markets,” he said.
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