Government should up rural spend to boost FMCG sector
Varun Berry, MD, Britannia
Feb 17, 2016 | Source: CNBC TV 18
• Consumer sentiment, particularly in rural India, is subdued, bringing down the fast moving consumer goods (FMCG) industry's growth to single digit. We are certainly seeing the consumers being tentative about their next steps.
• The golden years of rural development— 2008-2011— are over, when the government had spent enough to create demand. The agricultural economy is almost 18 % of India's GDP and employees almost 50 % of the total workforce.
• With the subdued agri commodity prices across the world, the minimum support prices cannot be increased. Hence, the government should increase rural spending and work for better yields in agricultural output.
• Despite the constraints, Britannia managed to garner 30 % rural growth and credits this to various factors. The company focused on building an efficient supply-chain system, presented consumers with a range of products and passed out commodity price benefits. In its stride for operational leverage, the company doubled its outlets to 1.25 million, which helped it post higher volume growth than revenue.
• If you were to look at the last quarter results, our volume growth have been higher than our revenue growth by 100 bps. We passed on some of the advantages of the commodities to the consumers but more than that what we have been doing is, we have been taking on this whole war on waste and efficiencies and that has been giving us pretty good results..