To boost consumption in rural markets, FMCG players need to offer the right value: BCG’s Namit Puri

A large part of the FMCG growth has been driven by value (pricing/ mix) which translates to pricing up, reduction of grammage for magic price points or reducing grammage or changing mix towards premium. If you decompose FMCG growth, one can see that only 30-40 per cent of this growth, depending on the category, comes from volume, the balance is actually driven by price and mix. In some of these categories, I think they have hit the bottom-end with that strategy as you cannot reduce grammage of products beyond a point for LUPs (low unit packs)..This, coupled with income pressure in rural and inflation has resulted in sluggish volume growth. So what we are seeing playing out in the FMCG sector in terms of subdued volume growth, which is partly due to this sustained trend playing out

Companies can really sharpen their consumer propositions with a well-thought out portfolio strategy supported with the right GTM (go-to-market) and channel mix. For a sub-set of affluent consumers, it is critical to ensure the portfolio offered is distinctive, meets the consumer needs and is differentiated. For consumption with rural, aspiring consumers, it is critical to offer the right value vs unorganized players. This requires in many cases putting grams in bag/ ml in the bottle, to be competitive vs local/ unorganised players. In order to do this, organizations have to create room on the P&L through end-to-end margin unlocks .The other key focus for FMCG players should be on expanding distribution.

 So there are many realities that are co-existing. In urban markets, affluent and elite households are fuelling the growth of the premium segment and that is here to stay and is a secular trend. This is playing out across sectors including FMCG, apparel, footwear, jewellery or consumer electronics. Growth in the rural sector is subdued right now because of stressed incomes, and also because FMCG players have been focused on value-led growth instead of volume growth. The “aspirer” segment continues to drive the shift from unorganised to branded segment especially in categories, where unorganised players still have a substantial share.To win with this segment, as I said earlier, brands have to offer great value.

Quick commerce is unlocking shopping missions very quickly. This growth is being driven by convenience, easier access, discoverability and ease of payment among other factors. At the same time, quick commerce players are investing in infrastructure to expand their footprint across cities. They are also getting their act together and improving their operating cost structures. Today, for affluent Indians, in the quick commerce grocery space the penetration in India is more than China. So there are all the right reasons for the quick commerce to grow. It all depends on the quick commerce players’ ability to get their business model right and strengthen their economics.