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Rural India is focus for Bajaj

News, 13 January 2016

NEW DELHI: FMCG firm Bajaj Corporation (BCL) has targeted rural India as a source of growth, just one week after a top executive expressed concern at the slowing of growth in that market.

In an investor presentation, the company indicated it would seek to "convert rural consumers from unbranded to branded products by providing them with an appropriate value proposition", the Economic Times reported.

But only last week, managing director Sumit Malhotra described the rural economy as a "worrisome issue".

"Nearly two-thirds of the FMCG demand emanates from rural India," he said, "so this rural slowdown is bad news for India's FMCG sector."

Malhotra was especially disappointed in the performance of the hair oil sector, which grew just 0.7% in the third quarter of 2015, compared to previous annual growth rates of between 6% and 7%.

He took some comfort, however, in the fact that margins remained high, thanks in part to falling raw material and transport costs and added that spending on advertising and promotions would rise as Bajaj sought to drive demand.

In the light hair oil sector, it is aiming to grab a 65% share of the market. In rural markets, for example, it sees a competitive advantage in the fact that its Almond Drops brand is the only one available in sachets.

It is also lining up Almond Drops for brand extensions into other personal care products, as it looks to "leverage on the strong connotation of almonds with nutrition".

Aside from these organic growth strategies, Bajaj indicated it is looking to grow via acquisition of niche brands "which can benefit from BCL's strong distribution network so that they can be made pan-India brands".

Bajaj claims a distribution network across 2.92m retail outlets, which it says "can be optimally utilised by introducing new products".

Data sourced from Economic Times; additional content by Warc staff