After two years of drought, the weather department has predicted a normal monsoon this year. Rejoicing along with water-starved villages are FMCG firms, who believe that there is a lot of pent up demand in these areas.
Analysts say two successive droughts led to a dip in income and economic stress, leading to low purchasing power.
Marico Ltd MD and CEO Saugata Gupta was quoted by PTI by saying: “There is short-term pressure on rural consumption and the situation is slightly stressed, especially in the states that have been affected by drought for two consecutive years.”
“Poor monsoons last year did have an adverse impact on rural demand and we have seen growth slowdown in the hinterland towards the second half of the year,” Dabur India CFO, Lalit Malik, was also quoted by PTI as saying.
Many parts of states like Maharashtra, Karnataka, Kerala, Gujarat, Uttar Pradesh, Orissa and West Bengal are facing drought.
With companies garnering up to 30 per cent of their overall sales from rural markets, they are keeping their fingers crossed for a good monsoon this year.
The companies are keeping fingers crossed for a good monsoon this year so that sales could be revived in the second half of this fiscal.
GCPL Business Head India and SAARC, Sunil Kataria was quoted by PTI as saying: “I expect a significant swing in the second half because of monsoon is June to September and it would change the consumer sentiments.”
He said the measures announced by the government in the Budget to boost rural economy will also have an impact on FMCG sales during the course of the year.
“There has been a pent up demand. People have been postponing purchases because as they do not have money today but aspirations do not die in consumers’ mind. They just hold back,” Kataria was further quoted as saying.
With the expectation of demand to pick up in the second half, Gupta said Marico lined up “an aggressive pricing strategy, prioritising long-term value and consumer delight over maximising short term margin.”
Malik also said Dabur has already put in place distribution footprint to tap the demand growth. It is continuing to enhance distribution coverage in rural India from 14,000 villages to over 45,000 villages now.