Good Read

Spoonfeedin WOrld

Business – India;Premium goods back on the shelf

Ratna Bhushan

NEW DELHI: Just when the country’s largest non-durable consumer products firm Hindustan Unilever shifted its focus from premium brands to value
brands to fight back a slide in its market share, high-end, high-margin products are staging a comeback on the back of improved consumer sentiment in urban centres.

Companies like Dabur, Glaxo SmithKline Consumer Healthcare, Britannia Industries and Cadbury are reviving high-priced products and packets and launching new promotional offers for modern trade like retail chains that cater mostly to the urban market after almost a year, without taking their eyes off low-priced priced packs that have been driving up sales in rural areas.

But they clearly want to hedge the risks of weak monsoon rains this year slowing the pace of growth in rural areas that helped the overall FMCG industry grow at an annual rate of about 20% over the last three-four quarters.

“Urban growth is staging a definite revival, helped by the overall positive economic sentiment and modern trade beginning to stabilise,” said Sunil Duggal, CEO of Dabur India. “We feel the next cycle of growth will come from urban markets.”

The company is now reviving some urban-centric initiatives it had stalled last year, such as aggressively promoting Real Bursst fruit beverages and Uveda premium skincare range. It also plans more urban-focused advertising, promotional spends and consumer offers through modern trade, Mr Duggal said.

Glaxo SmithKline Consumer Healthcare says the test-marketing of its premium imported anti-snoring product Breathe Right in Chennai, Hyderabad and Bangalore has generated encouraging response from consumers. “We expect far more numbers of high-end brands coming in, as the market fragments,” said Shubhajit Sen, the firm’s executive vice-president for marketing. He said the company will come up with multiple strategies to cater to both urban and rural markets.

Top biscuit maker Britannia and confectionery maker Cadbury too are pushing high-end packs in urban markets as aggressively as they have been on low-unit price points. “We are looking at capturing all existing opportunities, that’s why our focus is as much on premium as it is on low-priced products,” said Vinita Bali, CEO of Britannia Industries.

Britannia is pushing its premium Indulgences and Pure Magic labels in the Diwali festival season. Cadbury is betting on Celebrations Dry Fruit collection. While weak monsoon rains have so far not hit demand from rural areas, analysts and broking firms say the impact may be felt in the October-December and January-March quarters.

According to a report by Kotak Securities, an erratic monsoon and the impact of lower farm income could put soaps, detergents, shampoo, paints and biscuits at moderate risk, while oral care, snacking products, hair oils, beverages, milk powder and staples could be exposed to higher risks.

Another report by Angel Broking said the impact of drought on rural incomes will not be as severe as in 2003, due to better irrigation and government initiatives for social security such as the rural job guarantee scheme.
Detergents and personal care company Henkel’s former CEO and currently a board member on Henkel A Satish Kumar said:

“The number of consumer promotions are increasing in formats like modern trade – it’s one of the strategies to offset whatever shortfall in demand there could be in rural areas,” said A Satish Kumar, former CEO and current board member of detergent maker Henkel. Modern trade offers is a focus area for his firm. Now, the question is will Hindustan Lever, which was slow to respond to the rise in rural demand, miss the urban bus this time? Perhaps not.

In a recent interaction with ET, its CEO and MD Nitin Paranjpe had said the company’s entire portfolio, global and local brands, were crucial in the country. “Whether it is Lifebuoy, Lux, Hamam or Breeze, Dove or Pears or Rexona — all of them have a role to play,” he had said.


October 15, 2009 - Posted by | Uncategorized |

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: