Dabur India, a leading domestic FMCG company, is witnessing a significant rebound in rural markets. CEO Mohit Malhotra anticipates that growth in these markets will soon match that of urban markets within the next 3-4 quarters. The decline in inflation, coupled with the easing of commodity prices, is contributing to a gradual volume recovery in rural areas. This trend is effectively reducing the gap in growth rates between rural and urban markets.
Despite disruptions in rainfall in certain regions of the country, the recovery in the rural market is expected to persist. This resilience can be attributed to factors such as an increase in Minimum Support Prices (MSP), favorable winter crop sowing, and the ongoing election season.
Moreover, the unemployment rate in rural areas of India has declined, and the consumer confidence index has surged to an all-time high, nearly reaching the pre-COVID levels, according to his statement.
“There are definite very good recovery signs, which actually I am seeing. The festive season which is coming in, should augur very well for us going forward in the future. So I am very hopeful,” Malhotra said.
The corporation, possessing influential brands like Dabur Chyawanprash, Dabur Honey, Dabur Honitus, Dabur PudinHara, Dabur Lal Tail, Dabur Amla, Dabur Red Paste, and Real, is expanding its presence in rural areas through the introduction of affordable small-sized packaging.
Asked when he expects rural growth to come at par with urban markets, Malhotra said: “It’s a matter of time. I think it will take another three-four quarters… before rural comes at par with urban”.
However, he added that the urban market is also driven by new-age channels such as modern trade and e-commerce, which are contributing around 20-25 per cent of the FMCG business.
“So they are growing much ahead. For the rural, which is mainly GT (general trade as Kirana), to grow at that percentage is very difficult because the rural market has a large base and for a large base to grow at that percentage is difficult. So urban, I think for some time it is going to drive the growth,” he said.
Rural has a major population and almost 70 per cent of the total consumer base is from those regions, Malhotra added.
Pre-COVID, rural was growing ahead of urban, driving the growth in the FMCG sector, while urban was lagging behind, he added.
“Now, we are seeing gradual slow volume recovery happening in the rural market… if I look at the last quarter, we see rural growth of around 6.7 per cent urban growth overall 11.2 per cent.
“So, while the gap between urban and rural is narrowing, the gap is still there. Rural is still lagging urban but I think in due course of time as we lap over the lower bases rural recovery will continue to happen,” he said.
Rural markets generally contribute around 35 per cent of the FMCG industry and had shown positive growth in consumption during the March quarter this year, after a gap of six straight quarters, according to a report from data analytics firm Nielsen IQ.
Dabur as per its strategy is looking at both urban and rural markets, which are expanding with the launch of more premium products, as average disposable income in India is increasing.
In the urban market, where expansion is driven by e-commerce, modern trade channels, and expansion of mini metro and class one town, it is focusing on premiumisation with large pack sizes, while in the rural, it is targeting the aspirational buyers with low units price packs, Malhotra added.
“We get the best of both worlds,” he said adding “While in the rural areas, we go with the price points which are more accessible and the urban level we are premiumising.”
Now, 85 per cent of the country’s population is a consuming class, which includes the top and bottom of the pyramids. The aspirations between the urban and rural markets are becoming common with the growth of social media and smartphone availability.
Moreover, it is also trying to introduce some new brands in the premium category and also to relate with the millennials.
