The populist interim budget with schemes such as the Pradhan Mantri Kisan Samman Nidhi Yojana and no income tax for incomes under Rs 5 lakh per annum, will surely boost consumption at the lower end. "Union Budget 2019 turned out to be fairly good for consumption sector especially for lower unit packs which will benefit FMCG companies," points out Abneesh Roy, Senior Vice President, Institutional Equities-Research, Edelweiss.
FMCG companies will need to focus much more on their lower unit packs. Rural consumers as well as lower income groups in urban areas are equally aspirational and under no circumstances will they accept inferior quality product at a cheaper price. So, the interim budget could well lead to FMCG companies looking at democratising their products. "My masala orange drink for instance, is available at a price point as low as Rs 2 to as high as Rs 80. This will be the trend going forward, companies will provide their best products in smaller pack sizes and at more affordable price points," points out Piruz Khambatta, Chairman, Rasna.
Large food companies such as Britannia Industries also have the democratisation agenda top on their priority list. In a recent interview with Business Today, Varun Berry, MD, Britannia Industries, said, "Consumers want good products at the right price, therefore, we are trying to democratise the best products. I want to give the best product but I want to cut frills like packaging," says Berry. He gives the example of premium cookies Chunkies, which earlier came in a box of five cookies, each packed separately. "We have launched a Rs 20 pack. We have put five large cookies in a tray pack," he explains.
Alpana Parida, MD of design-led brand consultancy, DY Works, says that the rural markets even lap up highly premium products such as Kinder Joy. A rural consumer may consume a product like Kinder Joy probably once a month, but there is a market for it. Parida feels that there is a huge consumption market residing in small town India which most marketers conveniently ignore and only focus on the metros and semi-metros. "This budget will give impetus to innovations for small-town India," says Parida.
South-based dairy products company, Milky Mist, sells ghee in Rs 10 sachets. The coming months is going to see many more such innovations. FMCG companies will go all out to milk the consumption appetite of small town India with their premium products packaged in more affordable formats.