Rural and small towns to drive the FMCG sector over the next nine months, says Janani Kandaswamy of ITC

The next wave of growth and rebound for the fast-moving consumer goods (FMCG) sector, which has taken a hit because of the Covid-19 pandemic, is mostly expected from smaller towns and rural areas.

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Janani Kandaswamy

And with a rural uptick expected, the media mix for most brands in the sector will skew towards channels that have a higher affinity with the population strata of smaller towns, Janani Kandaswamy, Category Lead, Incense and Fragrances, ITC Limited, said in an interaction with BestMediaInfo.com

At the same time, she cautioned that “tailoring specific activities to cater to only rural areas and small towns is still not advisable since these will never attain the scale or reach offered by television advertising for FMCG players.”

She suggested localised digital activities to amplify TV and do targeted location-based marketing, which is going to become relevant in these times since every market has responded to Covid-19 in different ways and is also recovering with very specific trajectories that have to be kept in mind during media planning.

For example, she explained, a Sun TV with a higher skew in viewership towards upcountry Tamil Nadu will have higher share of media budgets for economy and mass brands. Once the lockdown lifts completely, investments could be retargeted into micromarketing initiatives such as wall paintings and other outdoor visibility, which are localised and tailored for smaller towns and rural areas.

With data penetration increasing across all strata of the population, she said digital advertising especially tailored for mobile screens will also become a key part of the marketing mix.

For many categories and brands, urban forms a chunk of the business and cannot be neglected.

But one cannot also ignore the fact that 25% migrants from urban are expected to permanently settle back in rural, with reverse migration from cities accelerating.

“This will lead to a jump in rural consumption and impact urban growth. There is an anticipated job loss in urban while rural will be relatively safeguarded,” she said.

This reverse migration will also negatively impact urban industries and may prolong the return to normalcy.

Without this happening, urban could have faced an additional demand of a minimum of 2%. With unemployment increasing, job losses will negatively impact disposable incomes. This will again primarily affect both metros and smaller towns in urban, she added.

The pandemic has affected both consumer behaviour and the retail landscape in FMCG. But within the sector, a few categories enjoyed a better run than the others.

In the initial months, especially April and May, the challenge of limited supplies of many categories — snacks, ready-to-eat items, grocery essentials as well as personal hygiene — led to a lot of switching behaviour in consumers.

With both traditional trade and supply chain opening in June, a staggered pickup is expected July 20 onwards, Kandaswamy said.

She said this festive season is expected to be better than the previous year considering a likely decline in Covid-19 cases, a bumper harvest due to a good monsoon and government initiatives to boost agri production.

“Restoration of normalcy in economic activities and industries is also expected to help. Averaging out over the next nine months, the FMCG sector is estimated to grow by ~5%, with rural growing faster than urban (6-7% vs 4%),” she said.

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