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GSK Rural Conundrum
By SPJIMR Mumbai Arthy Narayanan(email@example.com) Arpit Mundra(firstname.lastname@example.org) Abhisheikh Lahoti(email@example.com)
SPJIMR -2009 [Arthy Narayan, Arpit Mundra, Abhisheikh Lahoti] Page 1
The above network is devised mainly for the Foods category and the Rahat and Roshan OTC products (assuming selling the two will not need a drug license). Arpit Mundra. Retailer New strategy: Present model of 2 TIER approach could be expanded as follows to increase Reach . NGO/Villa ge leader Rural Dist. These entities gather unemployed locals from the same or nearby small villages who can act as rural distributors. Additional distribution network as a part of the new strategy Distributor Wholesale r Sub Dist.Live Life works with an external entity like an NGO or Village leaders/Sarpanch in the villages that have access to Live Life products at present. In SPJIMR -2009 [Arthy Narayan. They buy the products from the wholesalers and sub-distributors of Live Life who are already serving the villages and can re-distribute them in cycles/mopeds to the remote villages on a regular basis.GSK Rural Conundrum Rural Distribution Conundrum Live Life Ltd Super Dist. This entity now acts like a hub for the smaller villages that are closer to it and have no coverage through vans. Abhisheikh Lahoti] Page 2 .
High dependence on the rural distributor’s integrity and sincerity Threats Proliferation of local imitation in this channel • Our learning’s from some best practices in Industry: With the growing rural economy of India. who in turn pass it on to the star sellers. Arpit Mundra. many companies have adopted innovative strategies to improve their reach. • • • • • Strengths Increased layer increases reach only incremental changes made to the network – minimum infrastructure investment Involvement of local people – status as facilitators of rural income Opportunities Reaching untapped markets – opens up more opportunities Mobile trader is an asset All in one package for rural marketing. mela distributions • • Weakness Operational issues of finding an NGO. wholesale channel. One stop shop HLL’s project Shakti – Direct to Home model through Self Helf groups. Abhisheikh Lahoti] Page 3 .GSK Rural Conundrum order to improve the other OTC drug sales. A very high investment is needed to implement the above models at Live Life since its product portfolio is much smaller than ITC and HLL. Live Life Ltd can look for potential tieup with pharmacy chains like Apollo which are also working towards expanding their reach in the rural areas. • Collaboration in direct distributorship posed problems of having similar frequencies in case of other sectors (fertilizers) and competition would not SPJIMR -2009 [Arthy Narayan. brand building. Other innovative models: • • ITC’s e-choupal – a complete infrastructure network for distribution of various products across sectors. Hub and spoke model. Our strategy is a combination of Tata Tea’s Gaon Chalo model with 3 tiers (NGO and 2 tiers of rural distributors) and HLL’s Project StreamLine where goods were distributed from C&F agents to the Redistributors. using local people and mobile traders. Hence. The various distribution channels we came across used the tier system. heavy competition from other players and poor infrastructure in rural areas – distribution is a huge challenge. Hence need for alternate arrangements for carrying out the same responsibilities. direct distribution. information sourcing.
194 2 Wholesaler/ distributor partners margin can be reduced as guaranteed sale to our channel Page 4 SPJIMR -2009 [Arthy Narayan. The trend is to leverage local people and a single channel.GSK Rural Conundrum collaborate with a small player or reach would not create awareness for a small product line • Telecom sector for example used low price range and combination.Initial Building Network of NGO's + Village 559 leaders(opinion makers) < Creating 512 own distribution channel and Bn inventory management Cost mobile coverage person ( 4-5 villages) (> 9. Also now the issue of wholesaler pushing other products does not come into picture. They had fixed revenues because of usage in case of service providers.3 No of NGOslac India Population of 40 India 25534 6 20 Mn 113 Cr Mnth Avg rural percapita consumption expenditure Present rural FMCG sales Yearly Avg Rural percapita FMCG expenditure GSK-CH revenues (2% of FMCG) SO RRL percapita These figures show tremendous growth opportunities No of persons per NGO 565 Reasonable NGO to 74 Cr People Ratio No of people seeking work 70081562 Costs Involved Cost Assumption . Abhisheikh Lahoti] . Airtel too is invested in Agro processing to create a rural presence. In the absence of NGO’s they can be used to implement similar structure. • Data Analysis supporting our Strategy Rural Distribution conundrum Total no of Villages % of villages not connected Villages not connected by road (Additional Total market) Rural Popln. Leveraging the wholesale distribution channel. • • • The red line in the diagram indicates the redistribution channel. The use of wholesale as pseudo inventory stock holder for us may be cost beneficial The wholesaler now can have reduced margins as stock is pulled by the rural distributor.71 govt ) 4000 0. He also caters to the regular retailers. NGO/Village Leader/Rural Distributor economics 6. Arpit Mundra.
Abhisheikh Lahoti] Page 5 .CATALYST 1) Pulls products from wholesale. Though price higher caters to rural markets via low price points-5 SPJIMR -2009 [Arthy Narayan. distributors 2) Pushes products into unchartered territories 3)Brand awareness to locals -Health products 4) Information sources from villages 5) Newer products market identification and easy entry to supply chain 6) Village opportunities like Mela’s can be exploited through him 7) Distribution outsourced not Selling Human Resource Angle 1. Price highest for Iodex in 20 gm pack size (Moov is Rs 36 for 25gms) – Trying to tap consumer surplus 3. Rural distributor hired acts not only as distributor but . Training rural distributor will create health consciousness in areas 3. Price lowest for Iodex in 10 gm pack size 2. Price lowest for Iodex in 50gm pack size 4. Value nutrition to children through health drinks 4.Value creation in village 2. Corporate social responsibility without compromising Profit – leverage This * Data according to census and financial reports of 2009 Price Points and Pack Sizes Roshan 1. Arpit Mundra. Employment of rural people .GSK Rural Conundrum Marketing / Distribution Strategies 1.
children horlicks . Psychological effect of affect by antacid could be conveyed – Instant Relief 4. Complan charges a premium as compared to its competitors 2. Pack sizes for one time use could be developed which could be priced at Rs 2 to compete. Medicines are taken from a chemist and when required. bournvita 5 star as rural people might not even know SPJIMR -2009 [Arthy Narayan. Is 18 gm in health drink justified? 4. Variants and Tablets available at very nominal price 3. Highly priced. Health Drinks 1. it’s not even that high for 1 kg packs (Value for money packs selling most. The prices too are low for analgesics like crocin or calpol and therefore have a space in rural markets.GSK Rural Conundrum Rahat 1. Arpit Mundra.Here the price points and packs sizes is not that relevant. OTC Analgesics. Abhisheikh Lahoti] Page 6 . that why it doesn’t come in 1 kg pack as the price would be to high 3. It is about brand building and pushing the sales over the counter. Perhaps. woman horlicks . 18 and 90 gm – Rural Category. Qty / Re is highest for 90gms Badshah/ Hoshiar. Rural market acceptance of antacids vulnerable 2. Refill used suggests repeat usage and less relevance on pack size 5. Not much scope of selling variants in villages (variants like kesar .
3. text on pack in local language can differentiate 3. The price doesn’t reduce with increase in qty (exact linear) 5. and 20 for increasing quantity. attractive packing . When qty is similar. 15. Arpit Mundra. 4. 2. 500gm pack for upper middle class (rural) and 200gm for lower middle class (rural) and 90 gm below that Tasty Treat 72gm 144g m 189g m 288g m Tiger Parle (Cream) (Cream) 5 5 5 10 15 20 10 0 20 10 0 0 1. Pack size and Product Range similar for all the products 2. Bigger pack (20Rs) for upper middle class and big families 6. So concentration on basic range) 6. Low volume-low price strategy Refill packs / Reusable packaging Application of value engineering Ensuring price compliance Overall efficiency & passing on benefits to consumers SPJIMR -2009 [Arthy Narayan. The 15 Re variant is not available with competitors (can look at it both ways) 4. Rural Market Pricing and Pack sizes 1. Also to create a market children could be a target and to make it affordable pack sizes of Rs 2 could be tried. They are a niche product and may not yet find a space in the rural market. Abhisheikh Lahoti] Page 7 . Branding Necessary Energy Bars – The energy bar segment has prices starting from 5 to 10.GSK Rural Conundrum about them. 5.