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Small towns driving FMCG growthViveat Susan Pinto / Mumbai August 28, 2012, 0:52 IST

Over last three years, middle India, or consumers in towns with a population

between 100,000 and 1 million, has largely driven consum ption of fast-moving

consumer goods (FMCG). But, now, the trend is increasingly shifting to small towns,

or areas with population less than 100,000.

A study releas ed by market research agency Nielsen shows s mall towns have been

the prime driver of FMCG growth in the last 12 months. FMCG growth in smal l towns

has been around 19 per cent as opposed to about 11 per cent in metros, and 12-13

per cent in middle India. Rural (India), too, has been below 15 per cent, said Justin

Sargent, managing director, consumer at Nielsen India.

While middle India towns are estimated to be about 400 in the country, small towns,

according to market experts, are steadily growing. By industry estimates, smal l towns

are well over 2,000 in India. With growing affluence, it is increasingly the villages that

are morphing into small towns, they said. This is showing in consumption of

products.

For instance, the Nielsen study says products such as hair conditioners, air

freshners, prickly heat powders, after-shave lotions and liquid toilet soaps have

driven consumption in small towns. These specialist products, which you would

never associate with a consumer in a small town, is now a part of his shopping

basket, Sargent said.

Also, consum ers in these small towns are wil ling to spend more than their

counterparts in metros. For instance, people in small towns were wi lling to shell out

more on mobile phones than in metros or mini-metros. Their desire for

entertainment or their need to look good or s tay connected is growing, he added.

More so, these consumers dont seem to be shying away from experimentingproducts. In food items, for instance, small-town consumers are trying out products

such as jams and cheese products that have hardly been a part of their food plate.

Pre and post-wash products, jelly cubes are showing growth, Sargent said.

Are marketers then doing enough to target the small-town consumer? Sargent says

while marketers have driven small packs in sm all towns in keeping with the broad

trend of driving low-value units in these areas, things will have to change.

Small-town consumers want to shop like their counterparts in metros and mini-

metros. So, while small packs are still relevant in these markets, marketers will als o

have to take note of these new emerging segments. Similarly, retailers will a lso have

to reorient their focus when thinking of s etting up their stores. Do they need to target

these smal l towns? What kind of products can take off here, etc, Sargent added.

TOP 10 CONSUMPTION CATEGORIES IN

SMALL TOWNS AND MIDDLE INDIA

Consumer pull in small towns

(Q4 2011 over Q1 2011)**

Consumer pull in middle India

(Q4 2011 over Q1 2011)

Category % pull* Category % pull*

Cheese 103 Cheese 58

Prickly heat powder 53 Prickly heat powder 48

Packaged rice 47 Pre/post wash 44

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Hair conditioners 44 Home insecticides 34

Pre/post wash 41 Baby foods 33

Jams/jellies/marmalade 41 Fragrances 27

Jelly cubes 40 Blues 25

After shave lotions 33 Air freshners 25

Liquid toilet soaps 31 Baby oils/massage oils 25

Blues 29 Milk powders 24* Consumer demand at point of distribution; ** Calendar year Source: Nielsen