Budget 2017: FMCG, consumer durable companies look to tap rural market

NEW DELHI/KOLKATA: Consumer goods companies are already working on their strategies for the rural markets, where they expect demand to get a boost from Budget sops.

Affordability will be the primary focus as companies target the rural folks. In the offing are more small packs and entry-level products from biscuits and toiletries firms to appliance makers.

“With its pro-rural, bottom-ofpyramid focus and (the Budget) being non-inflationary, we expect growth will return to rural markets after a gap,” said Dabur chief executive Sunil Duggal. “This is a pro-consumption Budget for the rural economy and, after the setback of demonetisation, it helps especially for companies like ours with a strong rural focus.”

Finance minister Arun Jaitley’s Budget proposes to spend more on the rural side with an aim to double the farmer’s income in five years. This, industry experts expect, as well as the cut in income tax rate targeting mainly the small tax payers, focus on affordable housing and infrastructure development will provide multiple growth drivers for the hinterland.

Rural demand has been slow to rebound after demonetisation compared with the rest of the country. With the Budget balm, experts expect the situation to change fast.



Britannia managing director Varun Berry said the biscuits maker will renovate its entrylevel Tiger's brand. "There will be an overall thrust on all Rs 5 and Rs 10 packs in small towns and villages. Distribution inroads in rural will remain our biggest initiative," Berry told ET.

Dabur’s Duggal said his company will launch small packs of existing brands such as Dabur Red toothpaste and is exploring products targeting the rural consumer in categories such as hair oil. Marico, the maker of the Parachute hair oil, plans to step up production of low-priced packs, costing Rs 2-10, across categories.

“Our rural contribution has moved from 25% to 33% over the past few years. We hope to increase that number by a few percentage points, now with more creation of jobs expected in the rural sector,” managing director Saugata Gupta said. “We are expecting a much required stimulus for reigniting consumption after the slump caused by demonetisation.”

Makers of televisions, refrigerators and washing machines, too, said they will step up launches, promotions and distribution of entry-level products. “Consumers in the Rs 2-4 lakh income bracket tend to buy entry-level products. Besides a positive rub-off effect, some of them are probably up-trading their purchases,” said Godrej Appliances business head Kamal Nandi.

Videocon COO CM Singh said the tax benefit is also expected to widen the income tax net and more people to disclose their income. This will ultimately lead to penetration of consumer finance in small markets and widen its reach in existing large markets.