The Rs 47,800-crore fast moving consumer goods (FMCG) industry, comprising essentially the market for packaged branded consumables, grew by just 1.4 per cent in 2003. And key products such as packaged tea, detergent cakes & bars, even toothpastes registered a negative growth rate. Nothing-not the advent of regional brands, or downtrading by consumers, or the near-saturation levels in products such as toilet soaps-really convincingly explained why FMCGs had to suffer, while most other consumer categories such as mobiles phones, durables, autos and services boomed.

"Marketers were either looking at the traditional four regions or were going state-wise, and either way they could come up with little in the way of explaining market behaviour," says Subhashree Chalil, Senior Manager, ACNielsen, and the author of Different Strokes For Different Folks, the path-breaking study that puts forth the case for breaking up the country into seven regions-North, North Central, West, South, South Central, East and East Central-from the marketing point of view to obtain new, meaningful insights into current consumption levels and potential for growth.

Using geographical contiguity along with socio-economic and cultural parameters in the study of affordability, market accessibility and consumption disposition, ACNielsen mapped these seven regions and then overlaid them with broader demographics and FMCG retail sales figures. What emerged was a new way of looking at the market, one that offered new insights into consumption patterns and market clusters. "The four regions-North, South, East and West-that most marketers tend to look at are too broad for any meaningful interpretation of FMCG performance," says Jayasurya Chemudupati of ACNielsen, the author of Divine Diversity, a follow-up paper on this new regionalisation.

But didn't many FMCG marketers already follow some sort of sub-regional classification? "We have 15 marketing areas in the country, which are largely divided on the basis of geography," says Jayashree Mohanka, Group General Manager (Marketing), Eveready Industries. And most other companies that BT spoke to-Coca-Cola India, Hindustan Lever, Procter & Gamble, ITC, Gujarat Cooperative Milk Marketing Federation (GCMMF), Henkel Spic, Agro Tech Foods, Godrej, Dabur, Marico and Emami-will tell you that based on their specific product category needs, they do work on sub-regional sales and marketing structures.

Coca-Cola India slices Andhra Pradesh into a separate region, apart from the regular segments, North, South, East and West, primarily because it is one of the highest selling states for carbonated soft drinks. GCMMF historically works on a six-zone structure, and treats Maharashtra & Goa separate from the West, because it is headquartered in Anand, Gujarat, and West for it means the closer markets of Gujarat, Rajasthan, Madhya Pradesh and Chhattisgarh. "As far as infrastructure is concerned, we follow the five-zone strategy, with two zones in the West. For marketing purposes, the break-up differs depending upon the product in question, with no homogenous model as such," says Ashish Bhargav, Marketing Manager, Marico. Increasingly, marketers are voicing the need for a sharper regional segmentation. "A move is underway (at Emami) to sub-divide Uttar Pradesh into three sub-zones. But no final decision has been taken yet," says Harsh Agarwal, Director, Emami Group.

So, what's really new with this seven-region model? Lots actually. For one, it gives FMCG marketers a view of contiguous market clusters at a broad regional level sans artificial distortions in tax-related state boundaries, historical sales organisation or wholesale and retail structures. It clubs markets on the basis of economic and developmental parameters, and not purely on geography. So Madhya Pradesh is not West or Central, as most marketers have hitherto tended to classify it, but North Central along with Uttar Pradesh and Rajasthan.

How does that help marketers? The traditional four-region model clubs a market like Madhya Pradesh in the North, bringing down not just the average for the more prosperous Punjab, Haryana and the National Capital Region (NCR), but erroneously showing it in a more positive light even though its consumer parameters such as low per capita income, small pack size, large family size, low urbanisation levels and preference for economy products place it on a level with states such as Uttar Pradesh and Rajasthan. "Marketers can now pick up new cues on products, pricing and retail, and more sharply identify saturated and underdeveloped markets," adds ACNielsen's Chalil. Almost all FMCG marketers desperately need to do this to shore up their slipping sales, and of late, even profits. Will this new regionalisation help rescue them from the current growth guillotine? That'll be interesting to watch.

NORTH
More Volumes Please

Big is best: High per capita income coupled with large family size make North a volume driven market, even for promotions

Large average household size (read joint-families) coupled with higher levels of affordability make big pack sizes a favourite across most FMCG categories such as edible oil, tea and atta in the North. Volume-led promotions, the ones that offer extra volume at the same price, are most popular. The consumer mostly patronises the local grocer (such establishments account for 66 per cent of all fmcg sales).

The Green Revolution-led prosperity in Punjab-this is tapering-off from its 1980 highs-and the presence of the NCR in the North make it the country's most urbanised region (43 per cent urban population), with the highest per capita annual FMCG consumption, at Rs 871, across all seven regions. And even while the region is saturated for product categories such as tea, refined oil, shampoo, skin creams and toilet soaps, a host of other categories like coffee, coconut oils, beverages and tooth powders-per capita consumption is lower than the national average-have huge potential for growth. Even expensive lifestyle products, like hair dyes, sell like hot cakes here.

Strength in numbers: North Central's huge semi-urban, low-income population makes it a 'sachet' FMCG market

NORTH CENTRAL
The Big, Small Market

With urbanisation at a mere 22 per cent, consumers here spend just Rs 364 a year on FMCGs. Yet its 312 million-strong population, the highest across all regions, makes North Central the biggest FMCG mart in the country, accounting for almost a quarter of the Rs 47,800-crore market. And surprisingly, even though mass FMCG categories such as soaps and detergents have all stagnated here, lifestyle products like skin creams have recorded a phenomenal 9 per cent plus growth rate right from 1999 to 2003, though on a very small base.

Much like the case of its rich neighbour in the North, volume promotions are a hit in North Central. However, low per capita income and growth hinder sales of big pack sizes. Therefore, there is a higher preference for economy products and lower unit packs (read small packs). Traditional grocers reign supreme in the retail environment. Washing powders, detergent cakes, shampoos, blades and namkeens, are the categories to watch out for in this region.

WEST
Money For Time, Convenience

Ready-to-eat: Convenience and high urbanisation make West an ideal market for processed foods and non-grocery retailers

Highly developed infrastructure, high per capita income, high urbanisation levels and small average household size-all factors aiding FMCG consumption-make West the second biggest FMCG market after North Central in the country. So why has per capita non-food FMCG consumption fallen, from Rs 318 in 1999 to Rs 299 in 2003? Well, blame it on the influx of low-income migrants who have thronged the country's commercial capital, Mumbai.

And even though West mirrors North's preference for big pack sizes, the basket here is for entirely different product categories: think, for instance, scourers, fabric care and cooking medium. Processed items account for almost 70 per cent of the consumer's food purchases, with the convenience of packaging catching on even in basic provisions like cooking mediums and rice. And even though the grocer remains strong, chemists and non-traditional outlets are fast gaining currency for buying a soap bar or a tube of toothpaste.

SOUTH
Small Is Big

With the second highest per capita FMCG consumption (after North), at Rs 651 per annum, and a high per capita income, the South is turning out to be a lucrative market for washing powders, skin creams, anti-septic creams, butter, ketchup and sauces. Growth in services coupled with non-resident remittances and a very high literacy rate is propelling this region as FMCGs' growth engine for the future, with growth rates hovering above 6 per cent during 1999 to 2003.

Growth in expensive lifestyle products such as hair dyes, sanitary napkins and acne preparations have skyrocketed in the South, at 12.9 per cent, substantially higher than the mass FMCG products (soap, toothpastes), which grew at 5.3 per cent between 1999 and 2003. With a small family size, South remains typically a small-pack market and perhaps the only region where a fifth of all FMCGs get dispensed through chemist shops.

SOUTH CENTRAL
Marketer's Delight

A perfect mix: Traditional grocers get perfectly with South Central's tech boom-led growth in lifestyle and food FMCGs

Though, politically, the jury is still out on whether economic reforms implemented by the ousted Telugu Desam in Andhra Pradesh and the Congress in Karnataka had any significant trickle-down effect or not, South Central has remained a delight for FMCG marketers, logging the highest growth rate at 7.6 per cent between 1999 and 2003.

Spends on food FMCGs grew 9.1 per cent, and this when seen in the context of a high 75 per cent share of processed foods in the consumer's food basket, makes South Central a growth market for all kinds of packaged foods, ranging from cheese to ketchup to sauces. And unlike the South, grocers still remain a very dominant retail medium for FMCGs in South Central, accounting for nearly 64 per cent of all sales. Skin creams and mosquito repellents are the two categories where consumers tend to spend the most, one reflecting the region's high per capita income and aspirations build-up by the tech boom, and the other, well, what else, but the failure of governance.

Betting on brands: Despite East's low per capita income and poor infrastructure, the consumption attitude is already there

EAST
Proof Of The Pudding

East is a region with low urbanisation (24 per cent), medium-to-low per capita income and a far-from-optimal infrastructure. With only high literacy as a positive beacon, the region surprisingly mirrors the more prosperous South and South Central in its consumption behaviour.

There has been a shift from economy to premium-priced products in the East, though affordability dictates choice of low-priced packs. And increasingly, consumers here are getting brand conscious, preferring MNC brands to Indian ones, much like their counterparts in South and South Central. With 12 per cent of the country's population, and FMCG contribution lagging at 11 per cent, the region holds huge promise for liquid toilet soaps, shampoos, sanitary napkins, biscuits, even chocolates.

EAST CENTRAL
Half-empty or Half-full?

Promised land?: If UPA's much touted agricultural investments and guaranteed employment kikcks in, East Central will rev up

The most impoverished region in the country, with low per capita income, low literacy and very poor infrastructure, consumers here barely spend Rs 293 per annum per head on FMCGs. And small packs rule the market (52 per cent of all FMCG sales), with affordability being a major purchase criteria.

What's heartening for marketers, though, is the region's high growth rate, 4.5 per cent in 1999-2003, just below South Central and South. And what's important is that this cuts across both food and non-food FMCGs. So even though it trails national FMCG consumption (9 per cent to its 14 per cent population), categories like baby massage oils, weaning foods, acne creams, hair dyes and phenyl hold promise.

-additional reporting by Arnab Mitra, Nitya Varadarajan and Priyanka Sangani