Sunday, December 5, 2010

FMCG sector and Double Sided Growth

F.M.C.G. Sector is currently going through a drastic change in its approach and the market it is catering, the demand of the customers is changing and so  the need arise for a change in the product or the way it is marketed.

And in this phase of Change those would be severely hit those have least expected it. In this article I am not trying to give some roadmap but just wanted to inform you about the change which the F.M.C.G. sector is currently experiencing and which in due course of time is going to spread in other sectors also.

            Traditionally F.M.C.G. Sector was the one which used to serve through brick and mortar stores located near the homes but over the period of time the Scope of the Kirana Store have started decreasing with the development of Malls in metros and higher expectancy of the consumer. Today, the Share of Shopping Malls is continuously increasing in Big Cities like Delhi, Noida, and Mumbai etc.

            But, there is more in store which these companies have to grasp and that is the ‘Double Sided Growth’ .By Double Sided Growth I mean that on one side the companies have to realize that the average expenditure of a family in Big Cities is increasing and so they do have to offer premium products and a service which these consumers are requiring (sometimes the service becomes a more important component than the product itself) and on the other hand they have to look at the potential of the ‘Bottom of the Pyramid’.  Hereby they have to make their product cheaper so that they are able to offer ‘value for money’ and the medium through which they are selling should be no-frills store, thus adding no extra cost.

            While, on one side Consumers are willing to spend on higher priced and better quality product i.e. “ There is going to be a marked focus on beauty, health and wellness segments, which will definitely be growth drivers for this industry” For instance, one is already seeing a shift from cold creams to anti-ageing creams.  Secondly the Successful example of Fair & Lovely and chik shampoo in villages show the potential for growth at the ‘BOP’. The BOP in rural markets will become an another important source of consumption and it would require more tailored product that can offer more ‘value for money’ and products with No frills or extra cost.

            One More interesting trend to note is in the advertising because we all know a major success reason of any F.M.C.G. product is its advertising. In advertising on one hand we can see that the market of Television with youth is decreasing because of Fast lifestyle and availability of most of the interactive media on Internet. So there is an emerging trend whereby F.M.C.G. players have increased their focus on online advertising which is expected to grow at 30% a year. While on the other hand the inclusion of Television is increasing with the fall in the Television prices and comparative increase in the Purchasing power but still to attract that segment advertising solely on T.V. would be an expensive proposition and its reach would also be limited to the upper strata rural people. So, here companies are employing the rural media to increase their product awareness by employing the rickshaw, auto, Walls of houses and shops banner which have a higher reach and these mediums in village do attract attraction.

As you can see, both the strategies are far apart and both of them have no inter-relation and you can’t substitute one for other, but both are also important for a company to grow. If we look at the BCG (Boston Consultancy matrix) we would find that premium products currently come in the Star Section (having huge market growth rate and high Market Share) while the rural segment is still a question Mark (High Market Growth Rate but low Market Share) which if properly harnessed then would become a STAR for a company but may also end as Dog Section if proper attention is not provided.

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