Hindustan Unilever, the country’s largest consumer goods company, is eager to stay ahead of the curve. Not content with trebling its rural distribution reach, HUL, which sells more than 40 per cent of its brands in the hinterlands, is to increase its focus on the rural markets.
The company, which markets leading brands such as Surf Excel, Brooke Bond, Knorr, Dove and Lifebuoy, has added more than a million outlets across rural India, and thinks this is bound to be a source of competitive advantage in the future.
Speaking to Business Line, CEO and Managing Director Nitin Paranjpe insists that rural India should not be underestimated, and that the high aspiration levels of consumers in remote villages, who understand the difference between face wash and hand wash, was a wake-up call for the company. Excerpts:
You mentioned trebling your reach in the rural market. Can you elaborate as to how and from where this growth has come about?
We have trebled our reach in the rural market. The reported market growth suggests that the rural and urban markets have grown at a similar rate. It comes from several actions and steps we have taken in the last few years in terms of expanding our presence in that market and driving growth. We seem to have registered growth in these markets ahead of many other market players.
Can you give us an indication of the time-frame that you have seen this growth, since the company had an ambitious plan to add 500,000 more outlets in a year? Don't you think you have reached a saturation point in these markets and that now growth would plateau out?
Since 2010 onwards, we have seen our growth trebling in these markets. However, I don't know of any business that will talk of saturation point in the rural market. When there is growth coming from market development by educating people, it helps in creating and growing the market.
Companies marketing to rural consumers cannot extend their general marketing strategies to the rural markets. Instead, we need to devise specific strategies, and in the process, need to understand crucial issues relating to rural consumer behaviour and more specifically relating to different geographic regions of the country.
Aspirational products such as premium soaps, fragrances and packaged foods are to drive the consumer products industry. Do you see demand for these products in the rural market?
Absolutely. We have several examples. For instance, on a personal visit to a remote village in Coimbatore and again in UP, we realised that women are comfortable with products such as fabric conditioners, and can differentiate between body wash and face wash. Now, how would one imagine that in such small villages, aspirations have risen and that the people are upgrading themselves?
Given the slowdown in the market, volume growth in some of the discretionary categories appears to be falling. How is the company planning to tackle this?
Consumers are experiencing inflationary pressures. It is a difficult environment. Discretionary spends have come under pressure, especially in ice-creams and in packaged foods (which grew only seven per cent). Ice-creams, in particular, as compared to the last March quarter grew modestly, and was impacted by a slowdown in the market. However, we have delivered broad-based competitive growth and margin improvement in a challenging environment.
As consumers’ incomes rise, both rural and semi-urban consumers are graduating to newer products. The orientation of the consumption basket is bound to turn to favour products that satisfy his aspirational needs.