Personal care drives FMCG business on rural push

DELHI/MUMBAI: If you are stuck in a remote village in India, dusty and hungry, chances are you will find more options to wash your hair than fill your stomach.
For decades, food items have been the most widely distributed FMCG products in the country. But that rule of thumb is changing. Indians are more likely to find more personal care products than food in a shop these days—a result of consumer goods players pushing the distribution of an entire range of their products in the face of wary consumer spending.
Latest data from market research firm Nielsen reveals that on the list of the top five FMCG product categories, only one food product—biscuits— finds place. The category with the maximum reach, or penetration as it’s called in market parlance, is shampoos at 79%, followed closely by biscuits at 78%.

Distribution of categories has undergone a dramatic transformation in the last 15 years. FMCG is available in 8.8 million outlets and shampoo is available in 80% of those outlets, says D Shivakumar, chairman and CEO, PepsiCo India.
“Skin creams have got into the top 10 distributed list and packaged tea, which was the most distributed category a few decades ago, is now out of the top 10. Daily-use, low-unit price, easy-to-sell via wholesale are the key lessons for categories in the last 10 years.” Data suggests that most of this evolution is due to a lot of un-branded consumption shifting to branded consumption. For instance, in utensil cleaners and edible oils penetration has increased to 36% from 33% and 21% to 17% from 2012 to 2014, respectively. “Earlier, people would turn up at shops with bottles to buy loose mustard oil. That’s changing with rising affluence levels and lower packaging costs. In future, we will see more un-branded-to-branded consumption in non-mature categories such as, hair oils and hair conditioners,” says Vijay Udasi, executive director, Nielsen India.
The findings also reveal a drop in penetration levels of detergents cakes and bars from 60% in 2012 to 59% in 2014 as more consumers shift to washing machines to do their laundry. Similarly, skin creams have also seen a drop of 2% due to changes in consumer behaviour. “The segments within the skin creams category have also changed. More people are buying emerging products like face washes, anti-ageing and under-eye creams,” says Udasi.
For HUL, next step now is to make its brands accessible using pack sizes and price points tailored to win across the country. “We have been able to maintain our leadership position in a growing market by following a market development approach. One of the most successful attempts on this front has been the Dove ‘twin sachet’, which offers a shampoo and conditioner together at a Rs 5 price point to induce trials,” says Srirup Mitra, category head – Hair Care, HUL.
But the dominance of non-food categories on the top could change. There are ominous signs. Take the salty snacks category for instance. Penetration has risen from 58% to 64%. Even a category like noodles, which has still not broken into the top-ten list, has seen an increase in penetration from 38% to 42%. “The next level of growth lies within branded foods,” says Udasi. “There is an emergence of new food categories in bread spreads, including peanut butter and branded spices. As affluence levels rise, rural consumers will spend more on grocery items and food.”
Although FMCG growth has been slowing for some time now, sliding by 8.1% from 2010 to 2013, Nielsen predicts that India’s FMCG industry will grow from $37 billion in 2013 to $49 billion in 2016. Distribution growth and innovations around sachet offerings will play major roles in fuelling growth, which had slowed down in the last few years. While the rise of e-commerce is being keenly watched, several new models may evolve over the next few years.