- Demand in the first quarter has contracted due to high prices in April and May
Adani WilmarCEO to edible oilsale.
- Demand in rural areas will remain sluggish in the second quarter, company says
- Consumers are relegating to smaller packaging and cheaper brands, the company says.
- Adani’s own King’s brand, which is cheaper than Fortune, has outperformed in some rural areas.
Adani Wilmar witnessed subdued demand from rural India in the first quarter, despite the edible oil price cut at the end of June.
“Demand in the first quarter has not grown. In fact, it has shrunk due to very high prices in April and May, which partially fall in June and then in July,” Angshu Mallick, CEO, Adani Wilmar told http://gotechbusiness.com/ India.
The sale of refined oil, below the
Adani Wilmar had even announced a second sticker price reduction of up to ₹20 in July, but
“Rural demand will remain sluggish in the second quarter, also because they look forward to a better harvest, which they will only harvest from October. So from a money point of view, farmers will not have much money. I don’t think the demand will be strong in rural areas,” Mallick told http://gotechbusiness.com/ India.
Smaller packaging, cheaper brands
Because oil is essential to the household, consumers are relegating, the company says, to smaller packaging and cheaper brands. Adani Wilmar’s own lower rung edible oil brands, such as King’s and Aadhar, have outperformed in some pockets nationwide.
“In every FMCG category, we’ve seen consumers move to massive brands or popular brands instead of premium. From premium they have been degraded and we have seen that in edible oil as well,” said Mallick.
Masstige brands are mass-market brands that are priced lower than premium, yet retain a ‘brand’ value. In addition to massive brands, Adani also saw more demand for mustard oil from the Indian countryside.
“When it comes to mustard oil, we’ve seen Fortune mustard oil have much stronger shares than the massive brands because consumers are afraid of counterfeiting. So here our Fortune has fared much better,” said Mallick.
However, the trend towards smaller packaging has pushed volumes up as consumers now buy four to five times a month.
“If a one-time payment is 150 per liter, consumers will have to pay almost ₹2,500 for a 15-litre pack. So, paying a total of ₹2,500 by a rural or small town consumer is definitely cramped and heavy. As against that, they can always pay 100 and buy a half liter bottle or 200 for a liter,” Mallick said.
Also, after two price cuts in two months, they don’t want to buy large quantities, because they hope for another price cut.