Hindustan Unilever (HUL), which is already well entrenched in both urban and rural India, has maintained its strategy of straddling the pyramid. Urban-centric company L’Oreal, on the other hand, is looking at a more premium play and has put the sachet strategy on the back-burner. There are some like Nestle India that have a greater emphasis on urban market (75% of its sales) than rural, and are looking to strengthen its portfolio mix with a clear focus on the core.
In an exclusive interview with TOI, Nestle India CMD Suresh Narayanan said three factors will define the texture of consumption going forward. One is the mix of the portfolio which companies enjoy between super-premium, premium and mainstream products. “We will be expanding, but will be judiciously combining premiumisation with more mass-oriented products,” said Narayanan.
The second factor is the demand for a variety of products that consumers seek at different occasions.
“That’s what we played to with the aggressive innovation/renovation programme that we’ve had on 61 products in the last three years. That’s about three times what we were innovating before. The pace of innovation is going to play an important part,” said Narayanan.
Third is consumer-centricity of a brand. Those companies, said Narayanan, which are more consumer-centric and anticipate products that consumers might need are ultimately going to win the game with their agility and responsiveness.
“Today’s consumer, whether rural or urban, is seeking not just good price value but also trustworthy and sustainable quality. Consumers are looking at brands that are relevant to them. That’s a journey that companies need to traverse. So simply because your brand has been around for 50 years, in a particular format or price point, speaking a particular language, is not enough. It’s not consumers following the corporate journey, it’s corporates following the consumers,” said Narayanan.
Nestle India bucked the slowdown and declared a domestic revenue growth of 10.5%, which was better than its peers, in September quarter. Almost 60% of Nestle India’s incremental investment quarter-on-quarter has been on supporting new products. At this stage, new products form about 4% of Nestle’s domestic sales.
While it’s an investment stage and returns are low now, Narayanan said the company will invest in new innovations as long as it believes that it is getting a sustainable return. He, however, said the company cannot take its eyes off the ball with respect to its core.
A number of companies are said to be going back to focusing on the core. L’Oreal India, which had ventured into low-unit-price packs a few years ago, has withdrawn the sachet strategy. “Sachets are not part of our strategy,” L’Oreal India managing director Amit Jain told TOI recently, adding, “It’s very small. We conducted pilots some years back, but in shampoos and conditioners we are focused on bottles and to build a regime for haircare. We are focused on the premium play.”
Talking about the measures that can boost growth, especially in rural India, Narayanan said, “By now, we know it’s a demand-related issue. Albeit, I would say it’s less intensive as compared to some of the other sectors. If the monsoon impacts are positive, if some of the direct disbursement models are put into effect — some have also been talking about a reduction of income tax for the consuming class, along with GST changes — I think growth will start coming back.”
Narayanan, however, said it is not going to be a quick slope up. “It might be a bit steeper, but I still believe that there is hope,” he said. While adding a caveat that there are budgetary constraints which can neither be ignored nor forgotten, Narayanan said, “Equally, if you have to kick-start consumption, then we have to either put more money directly in the hands of people or indirectly through a tax effect.”