Devising strategy to get most out of rural demand: Marico

The second quarter displayed a mixed set of numbers from companies in the fast moving consumer goods sector which were battling a slowdown in urban spending. But FMCG major Marico is confident of securing decent growth going ahead on the back of robust rural demand.

Speaking to CNBC-TV18, Saugata Gupta, CEO, said the company is counting on significant improvement in volume growth over the next few quarters. The company is embarking on a strategy of direct distribution and focussing on right cost structure and right price points for consumption to tick in. Also Read: Positive on Dabur, Marico, Bata and Emami, says CIMB   Below is the verbatim transcript of the interview Q: Give us an idea of consumption trends and themes in India. On the volume front, Q2 results for all fast moving consumer goods (FMCG) companies were mixed at best. Are those ghosts of slowdown in urban discretionary spending still haunting you? Which segments and categories are showing the impact most? A: The slowdown started last year when there was a slowdown in the discretionary food items especially packaged foods. Then it flew down into top-end personal care, which is discretionary and that slowdown is happening mostly in urban India. However, I believe strongly that the worst is over because the base correction would start coming in sometime during December-January because that was the time last year when the sector started slowing down. Q: We spoke about rural demand as the next big growth driver a few months back because of the good monsoon but have the strong monsoon already translated into higher rural spending? Is it playing out in the second half or is it a bit of a dampener? A: There was no significant slowdown in rural India except in certain areas which had significant drought last year, for example Maharashtra. We believe that in the next few months the rural growth will continue to have a certain degree of momentum and one might not see significant upside because there was no slowing down that happened. However the rural growth will continue to be robust and I believe the sector will continue to grow higher at a faster rate in rural than in urban over the next couple of quarters. Q: Now that rural and mid tier India is where the next wave companies will ride on, how are consumer companies gearing to address this market? What is the change and strategy and how are companies like yourself going to tap the potential which rural markets have to offer? A: Two things; First, much more focus on direct distribution and therefore investments behind go-to-market in technology, in people and other infrastructure. Second is in terms of portfolio. I think what has changed in the last five-ten years is that earlier, ten years ago, they would have been looking at a different portfolio for rural and urban but people wanting the same brand, the aspirations are the same. It is a question of getting the right pack size, getting the right cost structure so that you develop a right price points for consumption to tick in.