Major FMCG companies are intensifying their focus on direct distribution in rural markets, especially when rural consumption trends continue to trail behind urban consumption. The renewed emphasis on deepening rural reach also comes at a time when competition from small and regional players has heightened.
In an analyst note published on Monday, Abneesh Roy, Executive Director at Nuvama Institutional Equities, noted, “The efforts to expand direct distribution in rural markets have been stepped up. FMCG companies hope this would help them tide over the challenges of slowing rural demand, which has been further aggravated by the stressed wholesale trade channel due to the liquidity crunch.”
Mayank Shah, Vice-President of Parle Products, stated that prominent FMCG companies have experienced heightened competition from smaller and regional players lately, primarily because of their aggressive promotional strategies.
“With moderation of inflationary pressures, some price-corrections have been taken by large players. But there is still some impact being felt in terms of volume growth by large players because there is still a price difference in the offerings of small players. As a result, most FMCG companies are looking at getting back their volume share. At one end they are looking to strengthen their play in emerging channels, at the other end ramping up direct rural reach is a huge opportunity,” Shah explained.
He additionally mentioned that Parle, with its already robust presence in rural areas, aims to further enhance its direct outreach in villages.
FMCG companies are anticipated to make substantial investments in enhancing the quality of rural distribution this year.
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Mohit Malhotra, CEO, Dabur India said, “ We have been investing ahead of the curve to enhance our distribution footprint in the hinterland. We are now reaching 107,000 villages directly up from 100,000 villages in March 2023.”
The company has set a short-term goal to expand its direct reach to 120,000 villages.