Consumer goods company, Marico, will invest Rs 80-100 crore over the next three years to increase its direct distribution in the country, chief financial officer Pawan Agarwal said in a conversation with FE on Tuesday.
Called ‘Project Setu’, the initiative will see the company improve its direct outlet reach from 1 million to 1.5 million by FY27. Currently, Marico reaches a total of 5.8 million outlets through direct and indirect distribution channels.
The distribution expansion initiative by Marico comes as organised FMCG companies in general have been looking to take up direct reach aggressively amid a resurgence in the fast-moving consumer goods (FMCG) sector. On Tuesday, market researcher NielsenIQ said that rural growth had outpaced urban growth for the first time in five quarters and that this trend was expected to improve in the coming months.
Agarwal says that ‘Project Setu’ will serve a two-fold purpose for Marico. “One is, it (Project Setu) will help enhance product assortment in stores and therefore help in diversification and premiumisation of the business. Second, it will help improve the viability of general trade which has been under pressure,” he said.
The maker of the Parachute and Saffola brands has been among the earliest to call out challenges faced by general trade (GT), which constitutes 70-80% of sales for FMCG companies. Agarwal said that the company has initiated several steps over the last few months to revitalise general trade including implementing primary stock reduction and extending credit terms on a selective basis to improve the profitability of GT partners.
The Mumbai-based said that ‘Project Setu’ would be funded through the re-allocation of resources, that is, by optimizing promotional spends and indirect distribution costs in the wholesale channel, reduction in organised trade promotional spends and savings from improving process efficiencies and reducing wastage.
Agarwal also said that he saw market share gains accruing to Marico as a result of initiatives such as ‘Project Setu’.