Bimaru states provide oxygen to FMCG firms

Once considered the laggards in economic growth, the Bimaru states (Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh) are now looked at as productive markets for fast-moving consumer goods companies.

Says Aditya V Agarwal, director of the Emami group of companies: "These are not Bimaru for us; we would be Bimaru without them."

Bimaru contributes 35-45 per cent to Emami's total sales. "These states are important, as most of our brands are doing well here. Apart from the youth factor, what makes them important is that the consumers here are brand-loyal," says Agarwal.

He gives part of the credit to the Mahatma Gandhi National Rural Employment Guarantee Act that has left more money in the hands of consumers. Emami puts 30 per cent of its annual ad spend in regional advertising, which includes these states.

Growth story

Not just Emami, a bevy of other companies have put Bimaru on their radar. The states hold potential, as 40-60 per cent of FMCG companies' growth comes from rural markets. More, per capita income in these states has started to grow at rates matching the national average.

The old Bimaru area comprises 36 per cent of India's population, with 40 per cent of India's youth. But the contribution to FMCG consumption is only 24 per cent. Industry experts believe the numbers are likely to go up drastically, as these states will benefit from the general inclusive growth agenda.

"These states don't contribute significantly to our revenue, but we are focusing on them, along with Chhattisgarh, since the rural economy in these states is doing well. Road infrastructure is improving, which will give another fillip to companies penetrating these states," says Anil Chugh, senior vice-president, Wipro Consumer Care and Lighting.

He said the diaper category had seen growth of 43 per cent from Uttar Pradesh in 2009-10 over the earlier year. In UP, the company has its presence in towns with 50,000+ population, and plans to also reach the taluka level (areas with 10,000-20,000 population).

The company will put in more money on regional channels like Mahuwa and Sahara in these states, adds Chugh.

So, too,  for Godrej Consumer Products Ltd. "These states consume 17-18 per cent of Godrej products. We expect it to go up to 25 per cent in a year's time," says A Mahendran, managing director.

Godrej is planning to increase its marketing spends in these states and expanding its distribution channels. The company spends 66 per cent of its total advertising and promotion spending on regional advertising.

Dabur registered strong double-digit growth in Bimaru states last year ober that in 2008-09, and expects this to continue.

"Dabur has rolled out special rural-focused sales initiatives across eight key states - UP, Punjab, MP, Chhattisgarh, Bihar, West Bengal, Maharashtra and Gujarat. Rural distribution reach was stepped up in 71 high potential districts in these states, penetrating to villages of lower population strata," says George Angelo, executive vice president, sales, Dabur India.