No festival cheer ahead for Fortune Oil’s rural sales, says Adani Wilmar CEO

• Demand in the first quarter has shrunk because of high prices in April and May, said Adani Wilmar CEO on edible oil sales.
• The demand in rural areas will continue to be slow in the second quarter too, the company says
• Consumers are downgrading to smaller packs and cheaper brands, the company says.
• Adani’s own King’s brand that’s cheaper than Fortune, has performed better in some rural pockets.

Adani Wilmar witnessed subdued demand from rural India in its first quarter, in spite of slashing its edible oil prices in late June.

“Demand in the first quarter has not grown. It has actually shrunk because of the very high prices in April and May, partially coming down in June and then July,” Angshu Mallick, CEO, Adani Wilmar told Business Insider India.

Its refined oil sales, under the Fortune Oil brand, was lower by 5.6% as compared to last year.

Adani Wilmar had even announced a second reduction in its sticker price in July by up to ₹20, but rural demand hasn’t picked up. It probably won’t in the second quarter either. This, however, has more to do with rural India’s spending power than the prices.

“The demand in rural areas will continue to be slow in the second quarter also because they would look forward to a better crop, which they will harvest only from October onwards. So from the money point of view, farmers will not have any great money. I don't think rural demand will be any robust,” Mallick told Business Insider India.

Smaller packs, cheaper brands

Since oil is a household essential, consumers, the company says, are downgrading to smaller packs and cheaper brands. Adani Wilmar’s own edible oil brands at the lower rung like King’s and Aadhar, have performed better in some rural pockets.

“In every FMCG category, we have seen that consumers have shifted to masstige brands or popular brands rather than premium. From premium, they have downgraded and we have seen that in edible oil also,” said Mallick.

Masstige brands are mass-market brands which are priced lower than premium but still retain a ‘brand’ value. Apart from masstige brands, Adani also saw more demand for mustard oil from rural India.

“When it comes to mustard oil, we have seen that Fortune mustard oil has much stronger equity than the masstige brands because consumers are afraid of any adulteration. So, here our Fortune has done much better,” said Mallick.

However, the trend of smaller packs has pushed up its volumes as consumers are now buying four to five times a month.

“If a single payment is ₹150 a litre, consumers have to pay out almost ₹2,500 for a 15 litre pack. So, paying ₹2500 altogether by a rural or a small-town consumer is definitely tight and tough. Against that, they can always pay ₹100 and buy a half litre bottle or ₹200 for one litre,” Mallick said.

Also, after two price slashes in two months, they do not want to buy large quantities as they hold on to hope of another price cut.