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Saturday, April 20, 2024

It will take a few more quarters for demand to fully recover


<p>The majority of consumer firms are still concerned about the slow rise in demand. But by introducing high-end goods, they have been able to profit on the increasing affluence at the highest end of the customer segment. In an interview with Dipak Mondal, Mohit Burman, the chairman of Dabur India, said that while rural demand is still behind urban demand, the difference has narrowed considerably. A sample:</p>
<p><img decoding=”async” class=”alignnone wp-image-443438″ src=”https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-it-will-take-a-few-more-quarters-for-demand-to-fully-recover-newindianexpress-2024-750×421.jpg” alt=”theindiaprint.com it will take a few more quarters for demand to fully recover newindianexpress 2024″ width=”1076″ height=”604″ title=”It will take a few more quarters for demand to fully recover 9″ srcset=”https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-it-will-take-a-few-more-quarters-for-demand-to-fully-recover-newindianexpress-2024-750×421.jpg 750w, https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-it-will-take-a-few-more-quarters-for-demand-to-fully-recover-newindianexpress-2024-1024×574.jpg 1024w, https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-it-will-take-a-few-more-quarters-for-demand-to-fully-recover-newindianexpress-2024-768×431.jpg 768w, https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-it-will-take-a-few-more-quarters-for-demand-to-fully-recover-newindianexpress-2024-390×220.jpg 390w, https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-it-will-take-a-few-more-quarters-for-demand-to-fully-recover-newindianexpress-2024-150×84.jpg 150w, https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-it-will-take-a-few-more-quarters-for-demand-to-fully-recover-newindianexpress-2024.jpg 1200w” sizes=”(max-width: 1076px) 100vw, 1076px” /></p>
<p>FMCG firms, particularly in rural regions, have been confronted with the challenge of a sluggish rebound in consumption. Would 2024 be any different, in your opinion?</p>
<p>Although, until a few years ago, rural India had been a major factor in the expansion of the FMCG business, the high rate of inflation in the preceding financial year caused rural demand to fall short of urban demand. Over the last year, urban expansion has been driven by new-age outlets including contemporary trade and e-commerce. Although syndicated data indicates that rural demand is still behind urban demand, the difference between the two has narrowed dramatically, indicating a progressive recovery in demand from the hinterland.</p>
<p>Nevertheless, Dabur reports that in the third quarter of current fiscal year, demand from the rural exceeded demand from cities, returning to the upward trend. In Q3, Dabur’s rural growth outpaced its urban growth by 200 basis points. We have implemented a number of measures to stimulate demand in the hinterland, and this is the outcome. Our rural presence increased from 100,000 in March 2023 to 117,000 in December 2023 as a result of our investments in this area. By the end of current fiscal year, we want to have covered 1.2 lakh communities in rural areas. Dabur’s rural distribution has expanded at the fastest rate compared to its FMCG counterparts, according to syndicated statistics, which gives us a clear edge and enables us to profit from the increase in rural consumer mood.</p>
<p>In order to serve these areas and spur demand development, we have also increased the range of products we provide in the rural market by introducing more recent, reasonably priced, and category-specific packs. In order to more effectively connect with customers in the hinterland and give them a chance to touch, feel, and experience our goods, we have invested in consumer activations in rural India.</p>
<p>Do you still believe that the bottom of the pyramid consumers should be worried about inflation?</p>
<p>Although the most of the current fiscal year had low inflation, which helped businesses maintain their profit margins, food inflation is already increasing. I predict that the demand will fully rebound over the course of a few quarters.</p>
<p>The majority of fast-moving consumer goods firms are aiming to premiumize their range of products. How has Dabur’s situation been?</p>
<p>We are looking at both urban and rural markets to generate growth, as I previously indicated. We are concentrating on premiumization with high pack sizes in urban markets, where growth is fueled by e-commerce, contemporary trade channels, and the emergence of small metro and class I towns. We are also launching new luxury brands that cater to millennials and centennials, especially on e-commerce platforms.</p>
<p>In order to connect with Young India, we are staging our core. Here, we are examining three crucial elements. The first is to strengthen the scientific claims we make for each of our products and provide clinical studies and scientific evidence to support them. Additionally, by adding aspirational packaging and new-age forms, we will be enhancing the relevancy of our tried-and-true and effective goods. The goal of the repackaging effort is to attract this younger user demographic. The goal is to improve an ergonomic pack’s design so that it is more comfortable for users to handle and use.</p>
<p>Do you have any plans to introduce any new premium product categories?</p>
<p>Sure, in order to increase our entire addressable market, we still keep an eye out for new and related categories.</p>
<p>Given that Tatas and Reliance are both stepping up their game in the FMCG sector, how do you see the battle playing out there?</p>
<p>For us, competition is nothing new; it has always been a part of the terrain. In actuality, it is advantageous to Dabur as well as the category as a whole. As an example, we work in the severely underserved Ayurvedic healthcare market in India. The addition of new competitors would only serve to increase the pie’s size and draw in more non-users to the category. Thus, the industry will benefit from it. And we would definitely gain from it as the biggest participant in the category with a history spanning over 140 years.</p>
<p>Will the private sector’s capital expenditures rise in the next fiscal year? How much capital you intend to invest in the next fiscal year?</p>
<p>Yes, I have no doubt that in the next months and years, private sector investment will rise. Our capital expenditures at Dabur were Rs 478 crore during the first nine months of FY24. Our estimated capex for 2023–2024 would be around Rs 500 crore. Along with investments in Nepal and other foreign companies, this also involves investments in our home factories in Indore and Tezpur.</p>
<p>In order to address the increasing demand for our goods in the area, Dabur also revealed intentions last month to spend Rs 135 crore in the establishment of a new manufacturing plant in South India. Our company now makes up between 18 and 20 percent of our domestic business in South India, where it has grown significantly. In order to better meet local demand, we have chosen to open a new production site in South India, where our contribution is steadily growing. In addition to giving us the chance to create more employment in the area, this also gives us the chance to increase our production capacity and satisfy South India’s expanding demand for Dabur goods.</p>
<p>You get around 25% of your income from overseas markets. Regarding the amount of money that you want to get from overseas markets in the medium term, what is your target?</p>
<p>Despite the geopolitical challenges, Our International Business posted an 11.7% rise in constant currency terms for the third quarter. As a policy, we anticipate reporting high double-digit growth in constant currency in the international business this fiscal year, even though we do not provide any forecast.</p>


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