Ritu Midha: The price paid for inflation

08 Aug,2013

By Ritu Midha


India’s GDP growth is down to around 5.5%. And though the government has pushed everyone spending more than Rs 32 in a day in urban areas above the poverty line, it has not really been able to force them to increase their spends.


The fact remains that Rs 32 a day is barely enough to scrape through the day and people can buy much less in that amount now than they did last year.  Blame it on price rise and inflation!


And it is not the story of people just bpl or apl, but across the middle class. FMCG, the fourth largest sector in the country has faced the brunt of it with sales in the quarter ending June 2013 not matching the expectations in most cases. A few examples: HUL 7% (slowest in last three years), ITC 10% (Non-cigarette FMCG 18.4%), Dabur  9%, Colgate Palmolive India 9% and Nestle India 9.8%.


However, if one looks at Y-o-Y growth, which as per AC Nielsen, saw a growth of 18.5% (2012 over 2011) the picture does not look that dismal. Though, one must mention here that not all companies did well.


For the purpose of understanding what really works for FMCG companies, Nielsen study looked at the top five (Hi5) and bottom five (Lo5) of the 20 fastest growing FMCG companies in India. The average value growth of the hi5 was 28%, while that of Lo5 was 18%.


The following are the factors, as per Nielsen that worked for the Hi5 FMCG companies:


A. Focus not only on quantity of distribution, but also on quality of distribution. ITC Yippee Noodles, the study states, expanded its reach through right outlets and improved its weighted distribution to 60% in two years.It managed to garner 10% of the category share in same duration.

B. To grow value companies need to focus on growing volumes among other things. P&G, for instance, launched Tide Naturals at RS 10, making it affordable to all. This move helped the company in increasing its market share substantially.

C. Innovative new launches definitely help. A good example here is of P&G’s Gillette Guard – which through research got the insight that in rural areas most men had to balance mirror in one hand, while shaving from the other. Hence Gillette Guard razor was launched with a better grip at affordable Rs 15. It garnered a market share of 44% in rural India.

D. Consciousness about consumers’ price sensitivity, more so in the times of  economic slowdown. ITC biscuits is an interesting example. It expanded its presence to multiple price points with a focus on popular segments – thus increasing its market share.

E. To understand that modern trade is an important retail medium. It is not enough to be present at traditional sales outlets. The Hi5 companies got a bigger share of their sales from modern trade than Lo5


Evolved FMCG companies are going that extra mile to cater to Indian audiences across the spectrum – and those which are not are in for rough weather. We often talk about lessons politicians can learn from marketing – and here lie two big ones: one, adjust your sails with the changing winds in the country, and, second, be all-inclusive, focus on one segment, and you are in for trouble.


Ritu Midha is a senior journalist and web strategist based in Mumbai. She is also Consulting Editor and Editor – Special Projects, MxMIndia.


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