FMCG

 As per Nielsen, demand for personal care products grew faster in rural areas
than urban areas during the period January-May 2010

 Shampoos, rural demand grew by 10.7 per cent in value terms, while in urban
markets, it rose by 6.8 per cent

 Toothpaste sales grew by 9.1 per cent in rural India and by 4.4 per cent in
urban markets
 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 .

2
 Rural Retail

 The rural retail market is currently estimated at US$ 112 billion, or around 40 per cent the US$ 280
billion
Hindustan Unilever Limited
 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.

Tupperware India
 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.

3
 Castrol
 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.'‘

4
 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.
5
 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.

6
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.

7
Chapter Objectives
Definition of Rural Markets
Significance of rural marketing
Emerging trends in rural marketing
Debunking of rural myths
Unique features of rural marketing
Future of rural marketing

8
Rural India – A Promising
Marketplace
742 million rural consumers waiting to be
tapped
Thirteen consecutive good monsoons barring
2002 and 2003
600% increase in the five year plans from the
Eighth to the Tenth plan
230% increase in flow of institutional credit
for agriculture between 1997-98 and 2004-05
Area covered, crop production and yield up
nearly 50%
9
Rural India – A Promising
Marketplace
As per NCAER, consuming class households in
rural India equal those in urban India
More than 50% of India’s largest FMCG
company HUL comes from the rural market
In durables, the average ownership of
electrical goods is 2.48 per rural family (for
electrified villages) against 3.39 in the urban
sector
Move towards GST and the streamlining of
direct tax process are two specific areas of
reform which are likely to yield benefits over a
long-term when implemented.
10
Some Impressive Facts on
Rural India

42,000 rural supermarkets (Haats) in rural India

against 35,000 retail chain stores in the US
The billing per cell phone in small towns in Andhra
Pradesh is higher than the billing in the state
capital Hyderabad

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12
 What Makes Rural Rarkets
Attractive?
Estimated annual size of the rural market Rs. 1,23,000 crores

Durables Agri-inputs
Rs. 5000 crores Rs. 45000 crores

Rural
Markets

FMCG 2/4 wheelers

Source: Francis Kanoi, 2005
Rs. 65000 crores Rs. 8000 crores
What makes Rural markets attractive?
2005-06 LIC sold 50% of BSNL 41 million Kisan
55% policies in rural connections Credit Cards
India issued

Rural
Markets

6.6 million 5.22 lakh villages 42 million

households have households
with Public
formal savings use banking
investments Telephones service
Definition
The Census of India defines rural as:
 Any habitation with a population density of less than
400 per sq. Kms.
 Where at least 75% of the male population is
engaged in agriculture
 Where there exists no municipality or board
Most FMCG companies define rural with a
population of up to 20,000 population
Most durable companies keep the limit at 50,000

RMB 01 15
 BARTER SIMILAR

1 2
TO
NORMAL
Rural
From

AREA
Urban

3 4
OF EXCLUDED
INTEREST

To
Rural Urban

The book will concentrate on Quadrant 3

RMB 01 16
Understanding Rural
Consumers
Fundamentally different from the urban mind
set
High degrees of difference in different parts of
the country
Due to lack of mobility and because of socio-
cultural reasons males take most of the
purchase decisions in the family
Community decision making is also very
common in rural India

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New Influencers
The sarpanch/pradhan continues to be a key
opinion leader
His influence is diminishing and is limited to
decisions on agri-products only
The rural youth who are attending colleges in
nearby towns and are exposed to the brands
and trends are gaining as influencers as
compared to the classical school teacher

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Products
Usage of products is different in rural environment
Cooking on ground rather than on platform
Electrical gadgets to withstand heavy voltage
fluctuations
Washing machines to run without running water
Smaller pack sizes for affordability and freshness
Innovation and education is the mantra for product
success in rural

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Rural Distribution
Need to understand where the rural consumer
buys products
90% of durables are purchased from 20,000+
towns (Source – IMRB study). There are 2,300
such towns all over India
Situation with FMCG more complex with
distribution to cover villages with population
over 2,000 population
Stockists are however limited to 20,000+
population towns to feed these villages
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Rural Communication
Need to understand that the consumer may
be buying particular brand or product
category for first time
Limited sources of influencers and information
make decision difficult
Below the line is therefore more suitable for
rural
Mass media only for creating awareness and
some interest

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The AICDA
Model
Ineffective use of traditional
channels like Haats and Melas
Considered most relevant and
credible by rural segment
Important to understand
aspirations, fears and hopes in
relation to each product category
Need for localised communication
aimed at relatively homogeneous
rural segments

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Information Technology in
Rural
Cost of technology down
Choupal by ITC
PCO in all 1,000+population village with STD
facility
Change in stocking pattern of retailers in
villages
Improvement in infrastructure
Introduction of large retail formats by
corporates and impact on the local bania

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Rural Markets – The Way
Ahead
The 4 Ps in marketing have to give way to 4 As:
 Awareness through traditional media of rural
 Acceptability through product modifications
 Availability through deep and innovative distribution
 Affordability through new price points
Public private partnerships to increase the size of the rural
pie by creating economic activity in rural
As rural moves from poverty to prosperity corporates will
have to shift focus to efficiencies and market innovations

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