As Patanjali rises, naturals take centre stage in FMCG line-up

The 'naturals' segment has begun eating into the growth of the 'non-naturals' pie at a very significant rate in the last few years. In fact, according to a top executive at Nielsen India, the eating-up rate is one percentage point on an average annual basis.

Neilsen defines 'naturals' as products with a set of ingredients occurring naturally and having benefits like aloe vera, neem, tulsi, sandal and are categorised as herbal, ayurvedic or natural.

Sameer Shukla, executive director, retail measurement services – South Asia, Nielsen (India) Pvt Ltd, said, while naturals have been an age-old trend/practice in India and Asia Pacific region, the trend is aggressively expanding to other parts of the world. "In the year 2016, the naturals segment contributed 41% to the overall personal care pie and the balance 59% was non-naturals. The increasing trend is evident from the fact that the number four years ago (for naturals segment in India) was only 37%," said Shukla, adding that though a lot of Indian companies were targeting the ethnic population (with naturals/herbal products) in other parts of the world, the trend has now started spreading globally.

On Patanjali's role in acting as a catalyst in growing this segment, Shukla said, based on the past three year's compounded annual growth rate (CAGR) data, the top three companies operating in this segment would have less than 50% (of the total growth) that's been witnessed in the naturals segment. "This basically means that there are many more companies operating in this space and it is not restricted to just a select few players that are feeding into this growth. It's [growth] is quite widespread in that sense," said Shukla.

The naturals segment in India's personal care market (comprising toilet soaps, skin creams, hair oil, hair wash and tooth paste) is estimated to be Rs 18,500 crore ($3 billion). Interestingly, the value growth of the naturals segment is racing ahead at almost 2.2 times that of non-naturals which is growing at 2.9%, Nielsen said in a report on Tuesday. And this growth is coming from the urban areas.

"It's got nothing to do with any particular manufacturer's actions; while they are only reaching out to the urban markets to start with, imagine what will happen when the rural areas get tapped. We also see that a lot of manufacturers who did not have a naturals portfolio have started picking up on this trend," said Shukla, adding that since the naturals offerings are made available at reasonable rates there is no reason for consumers to not pick it up.

The Nielsen report pointed that the naturals variants in personal care are priced 12% lower than the category average, making it 17% lower that average non-naturals. Among categories growing at healthy double digits are toothpaste (20.1%), hand and body (17.5%), shampoo (13.2%) and face care (12.9%). Toilet soap is the only exception with a de-growth of 1.3% because the category itself is declining hence the naturals segment isn't doing any better. And growing at 5% is the hair oil segment, which is largely natural.

While the naturals segment has witnessed over two-fold growth in the recent past, is it really sustainable? Nielsen said the fast-moving consumer goods (FMCG) industry faced a challenging market scenario post demonetization. However, the situation has drastically improved in the period between January to April 2017.

"Numbers for May 2017 will be released soon and we have seen that the growth has actually picked up. And the best part is that growth in the recent months is in healthy double digits. So the industry itself is growing at a handsome rate and the naturals segment would probably do much better," said Shukla.

On whether goods and services tax (GST) will fuel or obstruct growth for the natural products, Shukla said they still have to see in terms of how it pans out in the market. "The norms have just been finalised or are in the final stages of being finalised. GST will have a different impact on different categories as the rates are changing. Also, playing crucial roles are aspects like the way trade channels have been developed in the past, the way supply chain has been built in, etc," he added.

THE ORGANIC WAY

• The naturals segment in India’s personal care market is estimated to be Rs 18,500 crore ($3 billion)
   
• The value growth of the naturals segment is racing ahead at almost 2.2 times that of non-naturals