The Managing Director's statement semi-urban towns - 6,50,000 The real India lies
in its villages andvillages comprising around 900 million consumers accounting for
about 50% of the country's GDP and 70% of the population.
For years, this segment of the population accounted for possibly the largest
under-penetrated population in the world. There are indications that this population
segment may be at the cusp of a rapid transformation. The o_take of FMCG in the rural
market is expected to increase from approximately USD 20 bn in 2018 and is expected to
cross USD 100 bn by 2025, an unprecedented opportunity.
This transformation is expected to be derived through an increase in per capita incomes
and aspirations catalysed by the increased ownership of smartphones. Since the country's
rural population is equivalent to the cumulative population of a number of countries, even
a 1% increase in consumer product demand could create a significant opportunity for
consumer-facing product companies.
Success in a challenging space
Even as the country's rural market is large and growing, it is also challenging. For
one, the country's rural market is price-sensitive and influenced by product unit pricing
in multiples of H5 (H10/15/25) per unit, making it imperative to introduce quality
products at the right price points. The other challenge lies in the high delivery cost in
servicing semi-urban distributors and customers. Over the last few years, RMCL has
selected to deliver products to shops and marts by land. A distributor or customer gets
quick service with the option to pick up the product from a nearby shop with no delivery
charge, making it possible to not just save money but enhance footfalls. In addition to
online access, consumers need products to be physically available as well. RMCL services
aspiring customers and distributors in small towns, villages and agriculture-dominated
geographies.
In rural India, consumers need products in small and a_ordable SKUs. The Company
introduced high-end products for aspiring distributors and smaller economical packs to
attract first-time users. Besides, the Company is redesigning packaging around bulk packs
to address demand from beauty parlours. In rural India, consumers need one-stop solutions.
In line with this, the Company strengthened its organic manure and additive segment that
translated into a soil-to-harvest solution for distributors. In rural India, most consumer
brands focus on marketing a larger throughput. The Company is focused on the introduction
of online and o_ine education tutorials for NIIT, IIT-JEE, competitive examinations and
computer courses among others to attract students into the RMCL universe. In rural India,
there is a premium on the ability to extend from vertical to another.
The Company is reinforcing its long-standing FMCG exposure with pharmaceutical
products, addressing the growing needs of mid-range doctors, clinics and chemists. In
rural India, much of the distribution is geography-centric, with one individual
responsible for overseeing a specific geography. The Company reinforced this conventional
approach through the appointment of category heads. In rural India, there is a premium on
the need to enhance visibility. The Company opened more than 8,000 shops and approximately
300 marts, strengthening trust. In rural India, most brands make do with whatever
distribution personnel they get. The Company strengthened online trainings, ‘live
demo' and ‘recorded programs.'
Besides, shops, marts and eagle distributors conduct product training sessions and
sales skills training sessions, creating a single window system for product purchase,
after-sales service, creation of model plots for farming, and answering queries related to
incentives.
Growing our distribution competence
RMCL's reinvention of the consumer business was derived through a unique model, making
it possible to address growing demand and distribution challenges. Through the Company's
network of warehouses, depots and stores, a distributor is always provided products even
as neighbouring stores may not have the requisite inventory. Through this model, a
distributor books the desired product based on the inventory lying at the nearby depot. A
store calls for products from the
first in-first out possible and when products near expiry, these products are
aggressively marketed through careful selection and packing into Trial packs or starter
kits. The high sale of Starter Kits addresses slow-moving inventory.
What we achieved in 2017-18
The Company reported a decisive turnaround in 2017-18, sales being approximately 60%
higher and a profit of H103.05 million compared with a loss of H33.88 million in the
previous year. During the year, the Company added new products and increased its market
coverage through the addition of approximately 5000 shoppes. A major achievement was the
successful settlement/negotiation of ongoing H320 crore of long-term debt for H85 crore.
The outstanding debt is payable across five years, helping moderate our interest outgo and
2.5-2.8 times our assets. By the fourth quarter of the current year, we expect to increase
our capacity utilisation from 3%-5% in 2017-18 to 45%. In our consumer product business,
we are targeting to offier additional services to our existing customer base of 4 million.
We are introducing ‘Notional Discount Cash or RMCL Cash' to be used for further
purchases and services. This ‘Digital Discount Cash', which can be used across
services (flight or hotel bookings, DTH recharge, mobile phone bill payments, electricity
bill payments, gas payments, wallet transfers, among others) in addition to for RMCL
Galaxy Mall purchases (comprising products offiered by RMCL and third parties), opening up
a larger market for RMCL. The Company's incentives will be directed towards securing
‘future sales' through enhanced loyalty among distributors. We are in the process of
enhancing expertise in product knowledge, buying patterns and local preferences. We are
hopeful of expanding the business without straining our working capital requirements. The
Company plans to start RMCL Cafs in most the marts, equipped with vending machines,
microwave ovens, uniform furniture-cum-design and free Wi-Fi, making it possible to
strengthen footfalls, visibility and word-of-mouth promotion (over the conventional
costlier advertisement-driven route).
These initiatives could help the Company carve out a large market share of the direct
selling industry in India.
Overview
The last four years were trying for the Company. We have started building our direct
selling business and expect to resurrect our packaging business. We expect that a
combination of two profitable businesses should enhance value in the hands of our
stakeholders.
Mitesh Agarwal
Managing Director