Small cities drive Indian growth

29 August 2012

MUMBAI: Smaller cities in India will drive growth for FMCG companies in the coming decade, research firm Nielsen has said.

The new study, unveiled at the CII Marketing Summit in Mumbai, suggests that  the country's top ten FMCG companies have seen per-dealer growth of 17% in less-populous urban areas in the past year.

This "middle India" was defined as urban centres with populations of between 100,000 and 1m.

Firms ranked on the top 10 list include Hindustan Unilever, Nestlé India, and Indian Tobacco Company.

"The towns with 1-10 lakh [100,000 to 1m] population have shown highest growth in the last three years," Justin Sargent, Nielsen India's managing director, was quoted by the Economic Times as saying.

Sargent further noted that the current trend is for towns with populations of less than 100,000 to show the highest overall growth for the future.

But obstacles to future growth remain, with the report suggesting that brand success in these markets will rely on development of more effective distribution infrastructure over the next two years.

Improvements in distribution and packaging will help reach consumers efficiently and propel scalable growth.

"We are seeing the demand percolating from middle India to these lower towns," Sargent said.

"What metros achieved in the last few years, middle India will achieve in the coming few years."

A global survey released by Nielsen in July indicated that Indian consumers are among the world's most optimistic.

India received a consumer confidence index score of 119 during the second quarter of 2012, behind only Indonesia on the rankings.
In-depth analysis of India's burgeoning middle class is available for Warc subscribers in this exclusive article from TGI.

Data sourced from Economic Times/Nielsen; additional content by Warc staff