FMCG players find large money in little packs on their way to ‘rurban’ vows.

FMCG players find large money in little packs on their way to ‘rurban’ vows.

Companies such as Nestle and Dabur are counting on smaller packs and lower prices to entice value-conscious shoppers in rural and small-town America.

In order to achieve double-digit growth in rural areas, FMCG companies in India are depending on smaller pack sizes and low price points.

“We have expanded our product basket in the rural market by way of newer Low Unit Price (LUP) or affordable packs across categories to feed these markets and push demand growth,” said Mohit Malhotra, CEO of Dabur India.

The corporation has increased its investments to capitalize on the comeback of rural demand, expanding its reach to over 100,000 settlements.

“We have also invested in consumer activations in rural India in order to better reach out to consumers in the hinterland, giving them the opportunity to touch, feel, and experience our products,” Malhotra added.

Nestlé India, on the other hand, is relaunching its famous Maggi noodles at a Rs 10 price point in order to reclaim market share and compete in the packaged consumer goods industry.

This new Rs 10 pack, weighing 40gm, is aimed for “Rurban” areas in 15 states, while remaining at the same price in sections of Punjab and Uttarakhand. Prices of Rs 5 and Rs 10 have a higher recall and are easier to transact, making them suitable for low-cost consumer goods such as food and shampoo. Maggi Masala noodles are now available in Rs 7 (32gm) and Rs 14 (70gm) sizes.

Nestle and other FMCG businesses are continuing to refine their rural approach in order to capture a larger portion of this expanding market.

Dabur India has also launched Project Yoddha, which aims to penetrate tiny villages across the country and identify local entrepreneurs. The corporation hopes to build brand ambassadors in each town as well as provide constant revenue prospects to the rural communities through this campaign.

The promise of the countryside

According to a Euromonitor insight published on September 11, despite increased urbanisation and the expansion of metro and non-metro cities, rural areas will house half of all Indian families by 2040, compared to the global tendency of only a third of households being in rural settings.

Rural consumers frequently prioritize spending on basics and choose value packs to stretch their budgets. According to the survey, the physical landscape and ease of access to products also have a substantial impact on their purchasing decisions. As a result, for firms looking to grow and expand in India, a strategy centered on affordability, value, and robust distribution networks catering to the rural market is critical.

LPUs are propelling expansion

According to NIQ August data for India, consumption has grown by double digits, fueled primarily by reduced pack sizes in urban, rural, modern, and traditional sectors. Despite an increase in average pack size, it remains negative in most areas, excluding metropolitan ones. According to the research, brands must now provide the proper product assortment and pack sizes.

According to analysts, many corporations are focused on low price points (LPUs) to increase sales of these low-cost units. “Rural markets are largely driven by LPUs and low price point stock keeping units (SKUs),” according to Ajay Thakur, an analyst with Anand Rathi Institutional Equities.

Rural market digital penetration

According to analysts, digital adoption in rural regions has increased significantly, owing to more inexpensive cellphones and improving internet infrastructure. This expansion is changing how rural customers access information, products, and services, creating new opportunities for businesses and empowering communities via the use of digital tools and resources.

Rural consumers are increasingly concerned with value rather than price. According to a Proctor & Gamble (P&G) spokeswoman, digital access in rural regions is now on level with or even exceeds TV accessibility. “This change creates new opportunities for advertisers while also educating consumers about their available options, further fueling their aspirations.”

According to the spokesman, P&G’s primary focus has been on improving direct distribution in rural areas, adding, “By integrating artificial intelligence and machine learning with insights into local consumer patterns, we ensure our products reach the appropriate stores with the ideal mix.”

Rural demand forecast

According to NIQ, a consumer intelligence firm, both rural and urban markets in India are growing in August. While development in the rural market has been inconsistent, it has increased by 4% over the previous year. The urban market continued to thrive, with growth increasing from 5.3 percent in Q1 2023 to 10.2 percent in Q2.

According to Malhotra, demand trends in both urban and rural India are improving. “While rural India was once a key driver of growth, we have seen rural demand lag behind urban demand for some time now.” While rural continues to lag behind urban, the gap is closing rapidly,” he remarked.

According to Thakur, the hope is that after the festival season, rural markets would catch up with urban markets, but not yet surpass them.

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