Consumer goods are reducing product package size
Volatility will wane only when overall FMCG volumes grow 4-5%. Meanwhile Indian FMCG companies see rural demand reviving only in the next financial year. One of the strategies, as Abhay Avadhani finds out, is to reduce pack size in order to achieve the right price-value equation for competitive volume growth
08 May 2023 | By Abhay Avadhani
Rs 1,000-crore FMCG club grows in two years
First things first. On a per-capita basis, the rural sales of FMCG (fast-moving consumer goods) are 1/3rd of urban sales, so it is a very low base; however we have 2/3rd of the country staying in rural areas. India’s national per capita consumption of FMCG (fast-moving consumer goods) is Rs 3,600. In the rural countryside, it is Rs 1,200. Indonesians spend two times more; Chinese spend three times more; Filipinos spend four times more. Source: Indian Express
When WhatPackaging? spoke to the spokespersons among the consumer goods majors, one theme resonated. The FMCG companies have been battling the effects of high commodity costs by increasing prices and reducing product package size.
And yet, chief executives of some of the world’s top consumer goods companies, including Unilever, Coca-Cola, PepsiCo, Nestle and Mondelez, have remained largely positive about the Indian market in their recent earnings calls for the March 2023 quarter.
Revival of the rural economy was a critical part of the commentary of Unilever, which counts India along with the US and China among its key markets. While the US contributed nearly 22% of the multinational’s global sales of 60 billion Euros (or USD 63.3 billion) in 2022, India contributed around 12% to global topline, data from its results showed.
HUL Q4 result saw net profit jump 10% to Rs 2,552 crore and revenue rose to 11%. Sanjiv Mehta, who is the outgoing CEO and managing director at HUL said during an awards function, “There is still a large population at the bottom of the pyramid. That is where we need inclusive growth.”
WhatPackaging?'s hypothesis is that the gap between the rural socio-economic classes is widening and it is the well-to-do rural classes that are driving demand. This in turn is driving the trend for premiumisation. In fact these rural sectors have turned urban or as they say r-urban. For example, running tap water --> washing machine --> premium detergent
Conclusion: It will be interesting to see the volume - value trends across rural vs urban sectors. Meanwhile my fingers are crossed for three months of solid monsoon.
Rs 1,000 crore brands in India
Dabur saw four brands in the Rs 1,000-crore club, including Dabur Amla, Dabur Vatika, Dabur Red Paste and juice brand Real
Hindustan Unilever (HUL) saw three brands cross sales of Rs 1,000-cr in FY23. And so, from 16 brands in FY22, HUL has 19 that have sales in excess of Rs 1,000 crore. This list includes Lakme, Closeup, Pears, Kissan, Kwality Wall’s, Clinic Plus and Bru, etc.
Nestle India has Nestle EveryDay and Milo (41% topline) of Rs 6,816 crore in the calendar year 2022; while Maggi (31% of turnover) at Rs 5,300 crore. Meanwhile Nescafe and Nestea (12% of annual sales) at Rs 2,018 crore. And KitKat, Milkybar and Munch (16% of turnover) at Rs 2,654 crore in sales for 2022.
Tata Starbucks crossed sales of Rs 1,000 crore in FY23. The retail brand if part of Tata Consumer
Two 2000-cr brands: HUL's Lux and Ponds are part of the Rs 2,000-cr club in FY23. The Rs 1000-cr list includes Lakme, Closeup, Pears, Kissan, Kwality Wall’s, Clinic Plus and Bru.