India’s first homegrown ayurvedic FMCG brand Dabur has recently announced its rare partnership with energy provider Indian Oil. Through this partnership, Dabur will leverage the 14 crores strong network of Indane LPG consumer households across India for its direct-to-home sales. Under this partnership, Indian Oil’s Indan LPG distributors will act as the retail business partners for Dabur and sell the entire Dabur range of products to the Indane LPG consumers that will strengthen and deepen its reach across urban,semi-urban, and rural areas. This unusual D2C route will enable convenience and ease of buying through technological and system integration to provide seamless service to the value chain.
Dabur’s direct -to home sales finds potential in Bharat consumers
What is tempting for Dabur or other FMCG brands to opt for direct-to-home sales is the profit margin involved in this channel. Capitalising on the trend of e-commerce, most FMCG brands have begun delivering their products directly to the consumer’s doorstep and have reported an 88 percent rise in year-on-year consumer demand from the past years. In the coming years, D2C will be a popular business model that will find more relevance.
Partnering with the LPG network of Indian consumers is a strategic move for Dabur to establish its presence and bolster its network in the rural. Ever since the outbreak of the covid, Dabur has been witnessed continuous rural growth that surpassed urban growth in the third quarter of 2021. The rural growth for Dabur stood at 7.5 percent (in terms of value growth in Q3 FY 2021-22), while the urban growth stood at 2.6 percent. In the second covid wave, specifically in the Jan-Feb-March quarter where the overall FMCG industry shrunk by 2 percent but rural registered a 1 percent growth during the troubled times. The infections of covid did not spread to rural areas as much as the cities.
A majority of Dabur’s product consumption comes from rural India which accounts for 45 percent and is always 2 to 3 percent higher than the urban growth rate. Post pandemic rural consumers have shown adoptions to branded FMCG products in the healthcare space which was earlier absent. Dabur’s chyawanprash, Pudin Hara, Honitus, Lal Tail, and the multiple brands in the consumer health space has a consumer base, leveraging which the brand now wants to grow its brand ‘Real’ that was earlier limited to fruit juices and nectar. Under the brand ‘Real’ the brand has created three sub-brands called Real Fruit Power, Real Milk Power, and Real Health focussing on value-added dairy and fruit beverages. Under Real Health they are launching a host of healthy snacking options such as Chia seeds and roasted pumpkin seeds. Also, government schemes such as MNREGA and rural employment are ensuring more disposable income.
A majority of Dabur’s product consumption comes from rural India which accounts for 45 percent and is always 2 to 3 percent higher than the urban growth rate.
What lies ahead for the startups in snacking and smaller FMCG and beverage brands?
In the reality show, Shark Tank India we have witnessed several snacking startups, health beverages, and Ayurvedic foods are focussing on health and pitching for investments. The FMCG space is no longer occupied by the big companies and brands that have always been around. The covid year has made the masses realize the importance and potential of running their own business and saw a sudden increase in homegrown brands that promise to deliver chemical-free, all-natural FMCG products. The COVID educated, environmentally aware consumer base shifted their loyalty from big brand names to smaller newer brands and products. Therefore, smaller FMCG companies or startups should not shy away from serving the rural and semi-urban due to their low-income levels. There has been an evolution in the lifestyle of Indians across the semi-urban and rural segments that have primarily contributed to the surge in revenue generated by the FMCG sector in the country, and hence there holds a faster and broader growth for the FMCG sector in rural India.
Selling FMCG products in rural India can be driven through word-of-mouth sales, groups, and recommendations from friends and neighbours, which Dabur currently will be leveraging through Indane’s customers. If one customer is aware of the convenience of getting Dabur’s products delivered at the doorstep then the entire neighbourhood will try to avail products through this facility.