Rural Nepal fuels appetite for fast moving consumer goodsFMCG products such as noodles, biscuits, snacks, toothpaste, toiletry soap, shampoo, tobacco are the major products being consumed in rural parts of the country, manufacturers say.
Krishna Bohora’s small shop at Pathibhara in Bajhang district is filled with an array of products. Of all the items he sells, noodles, biscuits, confectionaries, snacks, beverages, tobacco and toiletries are the ones that fly off the shelves, says Bohora.
“Consumption of such products has gone up in recent years,” says the 27-year-old shopkeeper who started his shop eight years ago.
Manufacturers term these products fast moving consumer goods or FMCG, and they say the market for these products is expanding, especially in the rural areas.
“There are multiple factors that have contributed to the growth of FMCG consumption in the rural market,” says GP Sah, vice president at Chaudhary Group Foods, which produced a wide range of FMCG.
While a rise in minimum wages and income from agricultural outputs and remittance have resulted in the growth of the FMCG market in rural areas, road connectivity and electricity have played a crucial role too.
The Manufacturing Sector Profile 2017, published by the Investment Board Nepal, had projected robust growth of the FMCG segment with more brands targeting the rural market in the wake of people’s changing lifestyles and increase in earnings.
Nepal’s manufacturing sector is broadly categorised into three groups: industrial, FMCG and consumer goods.
According to the IBN report, FMCG is the largest sub-sector, accounting for 59 percent of the total manufacturing sector.
Though there is no clear history of FMCG, manufacturers say in the 1960s, when the government started promoting cottage and small scale industry, confectionaries, biscuits and bakery items proliferated the market.
The production methods were rudimentary. Most of the packaged foods and other items of daily use, however, were imported from India.
But 1965 onwards, Nepali industrialists started setting up their factories, especially in the eastern Tarai districts, thereby producing more such fast moving consumer goods in the country, according to Tikendra Shiwakot, sales manager at Asian Biscuit and Confectionery.
It was only after 1990 when democracy was reinstated and the country adopted a free-market policy, multinational companies started making their foray into Nepal, introducing a host of new products to Nepali consumers.
The products, however, were largely limited to some urban centres and they were still far from the reach of the rural population.
The Maoist war that started in 1996 had a huge impact on the overall development of the country and it impeded the growth of fast moving consumer goods, as people from rural areas started migrating to urban centres.
The war ended in 2006, but political instability continued. However, the situation was calm and small-scale industries tried to get back on their feet.
But gradually, local industries, multinational companies and importers started filling the market with their products.
Remittance, which amounts to 25 percent of GDP, has been the mainstay of Nepal’s economy. People’s lives in rural areas have improved.
“People are buying premium products in the FMCG category due to a rise in disposable income,” Sah says.
According to Sah, CG Foods FMCG saw a growth of 12 percent last year in the rural market alone.
CG Foods has its brand presence in almost all rural hill regions of the country, including Mugu, upper parts of Bhojpur, Okhaldhunga and Rolpa.
According to manufacturers, domestic FMCG—mostly toiletries and food products—hold 95 percent of the market share in rural areas of the country.
According to them, sales of FMCG products in rural areas are increasing by around 40 percent annually.
“Rural demand is set to increase with rising incomes,” states the IBN report. “FMCG is an attractive sector for investment, particularly for quality products and products specifically created for rural markets.”
The decentralised government structure has helped in the expansion of FMCG in rural areas, says Shivakoti. “Similarly, attraction towards cash crops and animal husbandry has also boosted the income source of people, leading to a gradual increase in spending capacity.”
While road connectivity has made it easier for manufacturers to ship their products, they are also utilising television advertisements to promote the fast moving consumer goods.
Aside from influencing rural buyers, the regular TV ads have been raising consumer awareness of both health and hygiene aspects of the products.
“The new generations in rural areas are living the development boom,” says Ujaya Shakya, managing director at Outreach Nepal. “Migrant workers’ families today have the cash to spend and regular advertisements on TV channels and mobile devices are making it easier for manufacturers to promote their products.”
FMCG products such as noodles, biscuits, snacks, toothpaste, toiletry soap, shampoo, tobacco are the major products being consumed in rural parts of the country, manufacturers say.
Manufacturers say Nepal consumes Rs6 million worth of noodles and Rs4 million worth of biscuits in a month.
The noodle segment has seen exciting growth in rural areas, says Tikendra Shivakoti, sales manager at Asian Biscuit and Confectionery (ABC).
Manufacturers are also coming up with innovative ideas to penetrate the rural market. Shampoo sachets — containing small amounts of shampoo — are specially designed for rural areas, as people can easily afford them.
Also, the reach of educational institutions, banking and financial institutions, hospitals, cooperatives is gradually increasing job opportunities and economic activities, Shiwakoti says.
Currently, Chaudhary Group, Bhuramal Lunkarandas Conglomerate, Sharda Group, Khetan Group, Kedia Organisation, TM Dugar Group and Laxmi Group are some of the companies that are producing a wide range of food items and beverages. Similarly, Jawalakhel Group of Industries and Nepal Distillers have specialised in the production of different types of spirits and liquors. Dabur Nepal and Unilever Nepal are the two multinational companies that produce and distribute FMCGs in the country in different categories from personal care to beverages to toiletries.
Unilever Nepal’s aggressive marketing has made it possible for the company to take its products to remote districts including Humla, Kalikot and Jajarkot.
The company has been packaging and marketing its products to people from all walks of life, regardless of their income level.
The company has been producing daily essentials such as shampoo, toothpaste, detergent powder, soaps, in small packs so that low-income people can afford it.
This has boosted the consumption of FMCG products in rural areas.
“Recent changes that we are seeing in rural Nepal is not just about the economy or living standard,” Shakya says. “It is also about the way rural Nepal is thinking, the way they are accepting trends that were once alien to them and the sense of finding their own identity in this new setup.”
Shakya, who has also been doing hyperlocal marketing and ad campaigns through a separate specialised vertical advertising agency named Lemon, says most people in rural areas are concerned about their oral hygiene and also wash their hands with soap.
“The brands and price points may differ,” says Shakay, “but the trends and aspiration levels seem to be merging across the length and breadth of the country.”
Bohora, the shopkeeper, agrees.
“People today know the products and have money to spend. “And manufacturers have brought the stuff to people’s doorsteps at an affordable price,” Bohora says. “One can buy a sachet of shampoo for Rs2 or a toothpaste tube for Rs20.”