FMCG companies wake up to a million Indias

Punjab likes tea with extra milk, so Hindustan Unilever (HUL) sells stronger blends in the state. The brand names are the same, the packaging is pan-Indian, but the tea itself changes from region to region. Welcome to the era of ‘micromarkets’ where one size no longer fits all, and marketers slug it out for dominance in each one of the ‘many Indias’.

“Step back and compare South Mumbai to suburban Mumbai,” said HUL CFO Srinivas Phatak, “there’s a fundamental transformation in the profile of consumers.” Their tastes and budgets are different, so the way stores are stocked differs. For companies, the challenge is to achieve the right level of ‘disaggregation’. “If you are able to get that right, you are able to service the consumers very differently.”

The fight for every inch of ground is partly technology-driven. Earlier, the FMCG majors were in an unassailable position. Their scale of distribution and communication, and their brand equity, kept new players out. But now, any upstart can catch consumers’ attention on social media. This by itself may not weaken brand loyalty, but new brands can have phenomenal trial rates.

HUL woke up to this changed reality first with its ‘Winning in Many Indias’ (WIMI) strategy that sorted the country into 14 clusters. Godrej Consumer Products (GCPL) is launching its ‘Conquering Micro Markets’ (CMM) plan in phases, and Dabur India has lined up its ‘Project RISE’ (Regional Insights and Speed in Execution) that sees India as 12 geographical clusters.

“Different states are growing differently from a GDP perspective, or in terms of infrastructure and agriculture,” said HUL executive director (home care) Priya Nair. “Chhattisgarh and Tamil Nadu are very different structurally, in terms of their GDP patterns, income profiles and consumer habits. The right strategy in Chhattisgarh is not equal to the right strategy in TN.”

A company may be ahead in a region or a state, but focusing on micro-markets tells it where it can do better within the region. “We are zeroing in on micro-markets through what we call dynamic district regions or DDRs,” said GCPL CEO (India & SAARC) Sunil Kataria. “In UP alone we have around 7 DDRs. Till now, we would do maybe one television ad for entire UP. When we look at DDRs, the game changes completely.”

“We used to be 4-5 branches a decade ago, and it worked very well for us then. Today, we think 14 WIMI clusters is the right way to do it. Maybe, in some time, it could be a completely different paradigm,” said HUL’s Phatak.

Maharashtra is one of the biggest states for FMCG companies in terms of size and value. GCPL has divided it into seven smaller district clusters under its micro-markets plan — Vidarbha East, Vidarbha West, Marathwada, Khandesh, Kolhapur-Konkan, Desh Pune and Mumbai plus Thane. “There are pockets in Maharashtra where GCPL has headroom for growth. Our micro-marketing approach for cluster districts gives us an opportunity to understand these skews,” said Kataria. “Each of these districts exhibits its own unique cultural nuances in language, food, occupations and the media they consume.”

In Marathwada, for instance, both Marathi and Dakhini are spoken. It is drought-prone and under-developed. Vidarbha in the state’s east is surrounded by Madhya Pradesh and Chhattisgarh, and most people speak Varhadi and Zadi dialects of Marathi and Hindi.

Kataria said a region’s standard of living affects its media consumption, which is an important part of marketing strategy. “For example, in Vidarbha and Marathwada, TV is the lead media followed by mobile, while print and digital penetration is relatively less. However, in the Kolhapur-Konkan region, apart from TV, print and digital are also well received by consumers. In cities like Mumbai, Thane and Pune, internet penetration is the highest along with the influence of cinema.”

How effective are these micromarket strategies? “In Northeast India, where Dabur did a pilot of Project RISE, revenue grew about 30% in the cluster,” said Dabur India CEO Mohit Malhotra. “We may get lead measures, but the final proof would be if my share changes in 4-5 months. In six months, we would like to see some quick wins. It will take one year to get an idea of how to do this,” said Kataria.

Understanding the change is one thing, building a marketing strategy around it is another. Considering that India has 10 million FMCG outlets, of which about 6 million are in rural areas, the task is tough. Old-school marketing based on gut-feel doesn’t work anymore. Now, it’s all about deriving consumer insights from data.

“It’s easier said than done. One thing we are realising is that the way we all learned marketing over the years is changing completely,” said Kataria, indicating that mindsets need to change. While GCPL will have a regional trade marketing head in each of its regions, it may need to double efforts for local implementation.

Systems, processes and technology also need to be brought up to date to implement such a differentiated marketing plan. HUL has a head for each of its WIMI clusters. “We expect marketers to have a more experimental mindset. As an organisation, we are investing significantly in experimentation on how to win the consumer,” said Phatak, adding that anyone who has the scale and capabilities along with the ability to be agile, responsive and nimble will succeed.