The case focuses on the rural marketing initiatives undertaken by the cola major - Coca Cola in India.

The case discusses in detail the changes brought about by Coca Cola in distribution, pricing and advertising to make
inroads into rural India.

The case also discusses the concept of rural marketing and its characteristics in a developing country like India.

Further, it also provides details about PepsiCo's rural marketing initiatives

ssues:

• The reasons behind CCI entering the rural market

• The strategy adopted by CCI to penetrate the rural market

• The role of advertising in the rural market

thanda' Goes Rural

In early 2002, Coca-Cola India (CCI) (Refer Exhibit I for information about CCI) launched a
new advertisement campaign featuring leading bollywood actor - Aamir Khan.

The advertisement with the tag line - 'Thanda Matlab Coca-Cola4' was targeted at rural and
semi-urban consumers. According to company sources, the idea was to position Coca-Cola as a
generic brand for cold drinks.

The campaign was launched to support CCI's rural marketing initiatives. CCI began focusing on
the rural market in the early 2000s in order to increase volumes.
This decision was not surprising, given the huge size of the untapped rural market in India (Refer Exhibit II to learn
about the rural market in India). With flat sales in the urban areas, it was clear that CCI would have to shift its focus
to the rural market. Nantoo Banerjee, spokeswoman - CCI, said, "The real market in India is in the rural areas.

If you can crack it, there is tremendous potential."5

However, the poor rural infrastructure and consumption habits that are very different from those of urban people
were two major obstacles to cracking the rural market for CCI.

Because of the erratic power supply most grocers in rural areas did not stock cold drinks. Also, people in rural areas
had a preference for traditional cold beverages such as 'lassi'6 and lemon juice.

Further, the price of the beverage was also a major factor for the rural consumer.

CCI's Rural Marketing Strategy

CCI's rural marketing strategy was based on three A's - Availability, Affordability and Acceptability. The first 'A' -
Availability emphasized on the availability of the product to the customer; the second 'A' - Affordability focused on
product pricing, and the third 'A'- Acceptability focused on convincing the customer to buy the product

Once CCI entered the rural market, it focused on strengthening its distribution network there. It realized that the
centralized distribution system used by the company in the urban areas would not be suitable for rural areas.
In the centralized distribution system, the product was transported directly from the bottling plants to retailers (Refer
Figure I). However, CCI realized that this distribution system would not work in rural markets, as taking stock directly
from bottling plants to retail stores would be very costly due to the long distances to be covered.

Affordability

A survey conducted by CCI in 2001 revealed that 300 ml bottles were not popular with rural and semi-urban
residents where two persons often shared a 300 ml bottle. It was also found that the price of Rs10/- per bottle was
considered too high by rural consumers...

Growth till now in rural market in different sector

The Indian growth story is now spreading itself to India's hinterlands. The rural consumer
market, which grew 25 per cent in 2008, is expected to reach US$ 425 billion in 2010-11 with
720-790 million customers, according to a white paper prepared by CII-Technopak, in
November 2009. The figures are expected to double the 2004-05 market size of US$ 220
billion.

The Union Budget for 2010-11 has hiked the allocation under the National Rural Employment
Guarantee Act (NREGA) to US$ 8.71 billoin in 2010-11, giving a boost to the rural economy.

FMCG

According to figures released by market researcher Nielsen, demand for personal care
products grew faster in rural areas than urban areas during the period January-May 2010.

In shampoos, rural demand grew by 10.7 per cent in value terms, while in urban markets, it
rose by 6.8 per cent. Similarly, toothpaste sales grew by 9.1 per cent in rural India and by 4.4
per cent in urban markets.

Several fast moving consumer goods (FMCG) companies such as Godrej Consumer Products,
Dabur, Marico and Hindustan Unilever (HUL) have increased their hiring in rural India and
small towns in order to establish a local connect and increase visibility.

Swiss FMCG giant, Nestle plans to make further inroads into the rural markets. The company
has asked its sales team to deliver "6,000 new sales points every month in rural areas" to
expand its presence in Indian villages, according to Antonio Helio Waszyk, Chairman and
Managing Director, Nestle India .

Retail

The rural retail market is currently estimated at US$ 112 billion, or around 40 per cent of the
US$ 280 billion Indian retail market, according to a study paper, 'The Rise of Rural India', by an
industry body.

Hindustan Unilever (HUL) is planning to significantly increase its rural reach. According to
Harish Manwani, Chairman, HUL, the quality and quantity of rural coverage will go up to the
extent that "what we have done in the last 25 years we want to do it in the next two years."
Currently HUL products reach approximately 250,000 rural retail outlets and the company
intends to scale it up to nearly 750,000 outlets in two years time.

Direct selling firm Tupperware India, known for its storage containers plans to foray into the
rural markets in the next two-three years. "We have solid plans for the rural market. We are
working on bringing products for rural people as well," said Asha Gupta, Managing Director,
Tupperware India.

Castrol India is pushing its rural sales by building up a distribution infrastructure to reach out
to all villages. According to Ravi Kirpalani, Chief Operating Officer, Castrol India, "Our
distribution now reaches 5,000-7,000 towns and villages, but we are planning to take our
products to six lakh villages with a population of less of 5,000.''

Automobiles

Car sales in rural India have been on the increase in the last three years since the government
announced various schemes such as farm loan waiver etc, for the rural population.

Maruti Suzuki's share of rural sales has increased from 3.5 per cent to 17 per cent in the last
three years. Mahindra & Mahindra (M&M) is now selling more Scorpios in rural and semi-urban
markets. Scorpio sales have increased from 35 per cent to 50 per cent in the last two years.

Toyota Kirloskar Motor (TKM), in which Japan's Toyota Motor Corp holds an 89 per cent
controlling stake, is planning at selling 40 per cent of its cars in rural markets in India.
According to Hiroshi Nakagawa, Managing Director, TKM, "We are aggressively expanding our
dealership footprint in India and quite a significant portion of this will be in country's
heartland. By end of 2010, we plan to have 150 dealers across the country."

Yamaha is also planning a major initiative in rural India by launching more models in the
affordable price range in 2010. "We are very strong in Tier 1 and Tier II cities. Now onwards,
our focus will be rural India (Tier III towns). We will launch more models in the affordable price
range to dominate the rural market," according to Pankaj Dubey, National Business Head,
India Yamaha Motor. At present, around 15 per cent of its sales come from the rural market
and Dubey sees this demand increasing substantially in 2010.

Tata Motors is also making efforts to sell its pick up truck Ace in rural markets. It has already
opened 600 small outlets for the Ace in rural and semi-urban markets. It has also tied up with
117 public sector, gramin (rural) and co-operative banks to help small entrepreneurs buy the
vehicle.
 

Servay

Importance of Rural Market

The main reason why the companies are focusing on rural market and developing effective strategies
to tap the market potential can be identified as:
 
 Large population:  Approximately 75% of India’s population resides in around 6,38,365 villages of
India spread over 32 lakh square kilometer.41% of India’s middle class resides in rural areas.
 
Higher purchasing capacity:  Purchasing power of rural people is on rise.
 
Market growth:  Market is growing at a rate of 3-4 % per annum adding more than one  million
new customer every year.
 
4. Development of infrastructure:  Government is taking a number of initiatives and
investing towards development of infrastructure facility and public service projects in rural India,
which includes construction of roads, electricity connection, telephone connection.
 
4. Thus more number of rural people will start enjoying facilities like television, internet access,
electricity connection, improve roads and better public transport system.
 
Some of the facts that will highlight the potentiality of rural market:
 
 According to a study by the Chennai based Francis Kanoi marketing planning services,
estimated annual size of market is
 
 FMCG - Rs. 65,000 crore
 Consumer durable - Rs. 5000 crore
 Agri inputs (eg tractor) - Rs. 45,000 crore
 2/4 wheelers - Rs. 8,000 crore
 Total -   Rs. 1,23,000 crore
 
 In 2001-02 
 LIC sold 55% of its policies in rural India
 50% of BSNL mobile connection sold are in small towns/villages
 41 million Kisan credit card issued (as against 22 million credit plus debit card in urban)
  

1 http://www.scribd.com/doc/9705016/Study-of-Opportunity-for-Fmcg-Products-in-Rural-Market

visit this site there is one pdf (2) http://www.ghallabhansali.com/admin/file/FMCG.pdf

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