FMCG firms drop prices, create smaller packs to lure rural India

Purvita Chatterjee Mumbai | Updated on January 22, 2018


Slowdown in demand for the second consecutive year makes firms adopt new strategy

Slowdown in rural demand for the second consecutive year is making FMCG companies create specific price points and products to step up consumption in this market.

While Parle Products dropped prices on its premium brands such as Milano to make it more affordable in the rural markets, Godrej Consumer Care is digging deeper into its ‘One rural’ programme piloting new projects such as community radios to push its brands such as Godrej No. 1 and Cinthol.

Rural incomes have been under pressure for the past two years with the benefits of employment schemes such as NREGA coming down and minimum support prices going up, says Sunil Kataria, Business Head, Godrej Consumer Products. “Today we are trying (to) enhance distribution and reach out to 60,000 villages directly with Re 1 price points for soaps and household insecticides,’’ he adds.

Community radio

As part of its One Rural programmes, Godrej is now piloting community radio programmes in the local dialect in States such as Uttar Pradesh by integrating its brands like Goodknight fast card at Re 1. “We are also aggregating and creating content for mobile phones since it has the largest penetration in rural India with music playing a big part,” added Kataria.

Biscuit major Parle Products is also willing to drop price points for its premium brands such as Hide & Seek and Milano and is getting deeper into the hinterland targeting villages with less than a population of 500.

Considering more than 50 per cent if its largest selling glucose brand Parle G comes from the rural markets with price points ranging between Re 1 and ₹5, its premium brand Milano and mass brands like 20:20 in single packs at ₹5 are also expected to help penetration of the cookie category further in the hinterland.

“We already reach out to two lakh villages with population of 10,000, but now we are reaching out to villages with a population of 500 and increasing distribution by 20 per cent with increasing budgets by 15 per cent for the rural markets realising the decreasing paying capacities in these markets,’’ said Praveen Kulkarni, Marketing Head, Parle Products. Dairy major Parag Milk Foods is also creating specific price points and packaging to drive consumption in the rural markets. Being an urban focussed company primarily, it now intends extending its rural reach with lowered prices across its two main brands of Go and Gowardhan for milk, cheese and ghee.

For instance, it has for the first time introduced ghee in sachets under its Gowardhan brand in two SKUs of 18 ml and 9 ml at ₹20 and ₹10 respectively.

Deeper penetration

“Rural growth has been under pressure and those FMCG companies which have deeper penetration into the hinterland have suffered in the second quarter. We have been a urban focussed company but as we expand our rural reach we are creating special pricing and lower unit packs to cater to this slow market,’’ says Mahesh Israni, Chief Marketing Officer, Parag Milk Foods.

Published on December 01, 2015

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