Emami to add 10,000 rural locations by March-end to increase reach
Informist, Tuesday, Feb 21, 2023
By Avishek Rakshit
KOLKATA – Despite facing demand headwinds from rural India, Emami Ltd is stepping up its reach in smaller towns and cities, with an aim to add close to another 10,000 small towns and upcountry locations by Mar 31, sources in the know told Informist.
As on Mar 31, 2022, Emami's reach in rural India was 40,000 and till the third quarter of the current financial year, the company had added only 2,000 towns and villages, leaving the rest of the targeted addition to be completed towards the end of the fiscal.
In the first two quarters of this year, the company's focus was on ensuring repeat sales on a monthly basis from new locations, and thus did not think it prudent to increase the reach before analysing the market trends.
Sources said, as on date, around 90% of its new rural coverage is generating repeat sales.
Till the third quarter, even as weak demand affected Emami's rural sales, which account for around 55% of total sales, the company could arrest decline in revenue from rural channels. This was partly due to earlier price hikes, higher sales ratio in lower volume packs and an increase in the rural distribution network.
"Any negative effect of a fall in demand in one (rural) location could be mitigated by an addition of another touch-point," a source familiar with the development said.
At the rural sub-stockist level, which Emami directly handles, the addition of new villages and towns generated business of close to 670 mln rupees during April-December, which is expected to go up to 850 mln rupees by the end of the ongoing financial year, a source said.
"It also results on logistics cost optimisation and a wider range of products can be offered as well with increasing coverage of rural location," another source said.
The key reason for Emami to keep increasing rural sales channels, despite demand headwinds, is the company’s hold on the rural market, multiple sources said.
Sources also said that despite the sluggishness in rural demand which affected its performance in the third quarter, it did not see any market share loss in rural channels. "So, as demand recovers, we are likely to benefit more given our presence in rural India," a company source said.
In its last investor call after declaring the financial results, the company’s Vice-Chairman and Executive Director Mohan Goenka, said that there is no "structural issue" with rural demand and sluggishness is seen to last till March-end after which some recovery is expected.
Sector analysts said that the rural macroeconomic environment is expected to improve with inflation easing off comparatively, an expected higher crop realisation and some government schemes.
At 1518 IST, shares of Emami were up 1% up at 390.15 rupees on the National Stock Exchange. End
