INDIA
FASTEST GROWING
FREE MARKET DEMOCRACY
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FMCGs Bet on Rural India
[Link] India Brand Equity Foundation
P A G E 2
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FMCGS BET ON RURAL INDIA
Every morning, at a time when most women in Indian villages perform
household chores, women in villages across Andhra Pradesh, Madhya
MNCs and Indian Pradesh, Karnataka and Gujarat are busy making money, selling products
companies alike are manufactured by FMCG company Hindustan Lever (subsidiary of
plugging into rural India Unilever Plc). Unlike the sub-stockists, the women entrepreneurs are
with a vengeance.A directly connected to the HLL distribution chain.
number of FMCG
companies have now MNCs and Indian companies alike are plugging into rural India with a
started relying on savvy vengeance. Till recently, most FMCG companies used to treat rural
entrepreneurs who markets as adjuncts to their urban strongholds and rural consumers as a
trawl the rural homogeneous mass without segmenting them into target markets and
hinterland, gathering positioning brands appropriately.
mountains of village
Which means that rural marketing ventures are now no longer a pilot
level data.
project at HLL nor are they charity efforts. “We are targeting Indian
villages because of a belief that there is real prospect for growth,’’ HLL
chairman V Banga told a national marketing conference last year. This is
why rural marketing is now a core marketing activity at HLL and the
company’s management trainees regularly spend 4 weeks with a retail
entrepreneurs to get a first-hand feel of how village markets function.
HLL has also established a single distribution channel by consolidating
categories. The channel seeks to build a network of sub-stockists. In
2003, about 6000 such sub stockists were appointed to service 50,000
villages with a total population of 250 million.
Likewise, at Coca Cola India, to reach out to rural villages, the company
started out by drawing up a hit list of high-potential villages from India’s
various districts. To ensure full loads, large distributors were appointed,
and they were supplied from the company’s depot in large towns and
cities. Full load supplies were offered twice weekly. On their part, the
large distributors appointed small distributors in adjoining areas. The
small distributors in turn fixed journey plan on a weekly basis.
In addition to these innovative distribution techniques, a number of
FMCG companies have now started relying on savvy entrepreneurs who
trawl the rural hinterland, gathering mountains of village level data. One
such entrepreneur, Pradeep Lokhande, distributes used computers to
schools in about 28,000 villages through his Pune-based rural consumer
organisation, Rural Relations. Lokhande supplies computers, collects data
[Link] India Brand Equity Foundation
P A G E 3
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FMCGS BET ON RURAL INDIA
in exchange, which is then sold to companies. The company now has a
database of 35, 000 schools.
The focus on rural
markets doesn’t really Besides tapping schools, Lokhande also strikes direct contacts with
come as a surprise. opinion leaders in villages and recording obscure details of the local
India’s rural market has economy. This data is now being lapped up. In 1996, Lokhande got his
been growing steadily first customers for the data: Tata Tea and Parle. Today, he has clients
over the years and is like HLL, P&G, Marico, Asian Paints, Telco and DSP Merrill Lynch.
now bigger than the
urban market for fast The focus on rural markets doesn’t really come as a surprise. India’s
moving consumer rural market has been growing steadily over the years and is now bigger
goods with an annual than the urban market for fast moving consumer goods (53% share of
size estimated at the total market). The annual size in value terms currently estimated at
around US $ 11 billion. around US $ 11 billion.
According to a study by the National Council for Applied Economic
Research (NCAER), there are as many 'middle income and above'
households in the rural areas as there are in the urban areas. Moreover,
there are almost twice as many 'lower middle income' households in
rural areas as in the urban areas. At the highest income level there are
2.3 million urban households as against 1.6 million households in rural
areas.
As per the NCAER projections, the number of middle and high-income
households in rural India is expected to grow from 80 million to 111
million by 2007. In urban India, the middle and high-income market is
expected to grow from 46 million to 59 million. Thus, the absolute size
of rural India is expected to be double that of urban India.
But despite the high rural share in these categories, the rural penetration
levels are low, thus offering tremendous potential for growth. This is
why Coke and HLL are looking to increase their reach. And others are
following suit.
Chennai-based CavinKare Products which makes hair dyes, organises live
demonstrations in remote areas where villagers get a free tinge of jet
black or blonde or red – free of cost. Brooke Bond Lipton India markets
its rural brands through magic shows and skits. Reckitt and Colemen
uses NGOs in rural areas to educate customers about product benefits.
[Link] India Brand Equity Foundation
P A G E 4
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FMCGS BET ON RURAL INDIA
But rural India isn’t just being developed as a consumer market. It is also
Launched in June 2000, being developed as a cost effective supply chain.
'e-Choupal', has already
become the largest Tobacco and foods major ITC is focusing on the rural segment to bring
initiative among all down its transaction costs. With a judicious blend of click & mortar
Internet-based interven-
capabilities, agricultural communities in villages use internet kiosks -
tions in rural India, its
services reaching out to known as e-choupals - to access ready information in their local language
more than two million on the weather & market prices. They are also able to disseminate
farmers in over 21,000 knowledge on scientific farm practices & risk management.
villages through 4100
kiosks across six states.
The aggregation of the demand for farm inputs from individual farmers
gives farmers access to high quality inputs from established and reputed
manufacturers at fair prices. As a direct marketing channel, virtually
linked to the ‘mandi’ system for price discovery, ‘e-Choupal’ eliminates
wasteful intermediation and multiple handling. Thereby it significantly
reduces transaction costs. While the farmers benefit through enhanced
farm productivity and higher farm gate prices, ITC benefits from the
lower net cost of procurement (despite offering better prices to the
farmer).
Launched in June 2000, 'e-Choupal', has already become the largest
initiative among all Internet-based interventions in rural India. 'e-Choupal'
services today reach out to more than two million farmers growing a
range of crops - soyabean, coffee, wheat, rice, pulses, shrimp - in over
21,000 villages through 4100 kiosks across six states.
Whether the objective is to increase market share or to lower
transaction costs, the end objective is to improve the robustness of the
rural supply chain. Moreover, these are scalable and robust models, and,
given the right policy environment, it should be possible to seamlessly
integrate them in the months and years to come.
[Link] India Brand Equity Foundation
P A G E 5
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FMCGS BET ON RURAL INDIA
Related Resources :
• To learn more about Pradeep Lokhande and how he’s creating a
rural network, contact him at 91-20-6821034; or e-mail:
rural@[Link]
• For a better understanding of Hindustan Lever’s rural
operations, visit the following links:
- [Link]
- [Link]
20030204_rural_market.html
• To learn more about the ITC rural project, visit: [Link]
[Link] India Brand Equity Foundation
AUGUST 2004 P A G E 6
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The India Brand Equity Foundation is a public - private partnership
between the Ministry of Commerce, Government of India and
the Confederation of Indian Industry. The Foundation's primary objective
is to build positive economic perceptions of India globally.
India Brand Equity Foundation
c/o Confederation of Indian Industry
249-F Sector 18
Udyog Vihar Phase IV
Gurgaon 122015 Haryana
INDIA
Tel +91 124 501 4087 Fax +91 124 501 3873
E-mail india-now@[Link]
Web [Link]
[Link] India Brand Equity Foundation
