Rural India promises growth

17 November 2011

NEW DELHI: Fast moving consumer goods firms stand to gain substantial benefits from tapping demand in rural India, where sales should increase rapidly in the next 15 years, a study has argued.

Nielsen, the research firm, predicted that the category's rural revenues would total $100bn by 2025, measured against the current $12bn, or 34% of nationwide FMCG returns.

Population expansion is due to account for an extra $3bn in sales, while inflation and strategic price rises on the part of manufacturers deliver $39bn, and pure additional consumption adds $46bn.

One core trend observable at present, Nielsen said, is premiumisation, with sales of high-end lines having seen a compound annual growth rate (CAGR) of 21% over the last two years.

A growing desire for branded goods is also evident, as shown by the fact refined oil has enjoyed a CAGR of 44% in the same period, as shoppers trade up from traditional loose oil.

Similarly, impulse purchases are now more regular, with the salty snack category one beneficiary, as sales have logged a CAGR of 55%.

Extra large pack sizes have witnessed demand leap by a CAGR of 40% in the last two years, while "low unit packs", like single-serve sachets, were up 22%, ahead of the overall growth rate of 19%.

The importance of reaching these markets cannot be underestimated, Nielsen suggested, not least as 70% of the domestic population lives in such areas.

Some 60% of shoppers interviewed by the company said they did not envisage moving in the future. This proved true for only 43% of their urban counterparts.

Engaging this audience is also becoming easier, as 84% of households now contain a television set and 80% possess a mobile phone, the primary source of web access for many Indians.

Indeed, just 20% of rural residents had a computer offering an internet connection. "As smartphone affordability and accessibility continues to grow, Indian consumers may skip the third screen altogether," Nielsen said.

Data sourced from Nielsen; additional content by Warc staff