Scorching Summer: Beverage Makers Gearing Up To Meet Rural Demand FMCG companies are ramping up production to meet the demand coming from rural pockets this summer

The Union Budget 2024-25 focused on rural economic boosters, which amplified opportunities for companies to strategize in rural markets. As per new reports, average rural household monthly spending is on the rise and expenditure on beverages has significantly increased. Seizing the right set of circumstances, beverage companies are ramping up production to meet the demand coming from rural pockets this summer.

Syndicated data shows that Dabur's rural distribution has grown the highest among FMCG peers, giving it a distinct advantage to reap the benefits of improvement in rural consumer sentiments. The company has been investing in expanding its rural footprint, which has increased by 17,000 villages in the first nine months of 2023-24 fiscal alone, from 100,000 to 117,000. "Alongside, we have expanded our product basket in the rural market by way of newer affordable and rural-specific packs across categories to feed these markets and push demand growth. We have also invested in consumer activities in rural India to better reach out to them in the hinterland, giving an opportunity to touch, feel and experience our products," said Anshul Gupta, head of sales, Dabur India Limited.

Additionally, rural spending is likely to rise due to increased disposable incomes following a normal monsoon season. Content-led disruption will be big theme for this season, along with brands making the most of the four-month cricket season. "In less populated areas, products with lower price points and high consumption frequency such as those priced at INR. 5 and INR 10, are expected to dominate. Meanwhile, in metropolitan markets, home stocking and dairy based beverages would grow ahead of the category. With Smoodh, we've disrupted the market at a price point that will drive penetration of the category and give us dividends going forward," said Ankit Kapoor, head of marketing and international business, Parle Agro.

With rising awareness about wellness, the beverage category is seeing a rising demand for functional products which have additional health benefits. Fruit based drinks such as Mango drinks and other traditional products such as sharbats, lassi, thandai, chaach, will see rise in demand. When considering beverages there is always demand for thirst-quench products and there's a noticeable inclination towards rehydrating options such as glucose drinks. These selections cater to consumers seeking both refreshment and health benefits. "We are expecting huge potential from rural markets in the coming year. Economy variants in the beverage category will grow in rural areas; our RoohAfza sachet at the INR 10 price point caters to rural and interior markets. We would continue launching price friendly smaller packs in these pockets," said spokesperson from Hamdard Laboratories.

For the first time in 2023, the consumption gaps between urban and rural markets narrowed down, with rural areas witnessing a commendable 5.8 percent growth, closely approaching the urban growth rate of 6.8 per cent. The North and West regions were crucial contributors to this harmonious development, Nielsen IQ said in a recent report.

"In the next 3-6 months, the urban market would continue to grow ahead of rural areas, driven by new product launches. If the normal monsoon plays out, things would pan out differently. We continue to grow our distribution on the back of the right price points for RUrban markets. Frooti will continue to be the lead brand, leveraging the INR 5 and INR 10 price points to drive penetration," Kapoor of Parle Agro explained.

The dairy market in both rural and urban areas is significant, with unique dynamics and consumer behaviours. While urban areas often showcase higher consumption rates of value-added dairy products (VAPs), companies are witnessing an uptick in demand for VAPs in rural areas too. "Godrej Jersey's strategy involves targeting both segments by offering a range of products tailored to their preferences and affordability. This includes expanding distribution networks, introducing products suited to rural tastes and implementing marketing strategies that resonate with diverse consumer demographics,' said Bhupendra Suri, CEO, Godrej Jersey.

Consumers exhibit greater willingness to spend during peak seasons, contrasting with more conservative spending habits during off-season periods like spending INR 20-40. Additionally, there will also be a rise in pouch packaging, particularly for products like buttermilk, milkshakes and fruit drinks. Aligning with this trend, CavinKare has strengthened its portfolio in the flavored milk market, a significant category that appeals to a broad spectrum of consumers across various life stages. "We are now taking it to Andhra Pradesh and Karnataka. Our flavored milk offerings cater to diverse age groups, ensuring widespread appeal. We've introduced three distinctive variants: rose, Kesar, and badam. As a company, we prioritize delivering added value to consumers," said KG Mallikeswaran, Business Head- Beverages, CavinKare. In rural areas, the company anticipates a higher demand for lower-priced products, such as pouch-based and tetra-pack beverages priced between INR 10-20. "Compared to urban areas, these affordable options are expected to see significantly greater sales volume," Mallikeswaran added.

Average pack sizes in rural areas are on the recovery path, with a growing preference for larger packs. This contrasts with urban markets, where a persistent preference for larger packs is observed. NIQ in its report portrays a dynamic FMCG landscape in India, where urban-rural convergence plays an important role. The optimistic outlook for 2024 signals a robust future for the FMCG sector, emphasizing the industry's adaptability and enduring significance.