3. Rural Market Has Finally Arrived
• 742 million people
• Rural is bigger than urban
• FMCG's 53%
• Estimated annual size of the rural market
• FMCG Rs 65,000 Crore
• Durables Rs 5,000 Crore
• Agri-inputs (incl. tractors) Rs 45,000 Crore
• 2 / 4 wheelers Rs 8,000 Crore
• Total Rs 1,23,000 Crore
Source: Francis Kanoi, 2002
4. Rural Market Has Finally Arrived
• Some impressive facts about the Rural market
• In 2001-02, LIC sold 55 % of its policies in rural India.
• 50% of BSNL mobile connections in small towns/
villages.
• 482 crorepatis in rural Haryana, only 137 in
Bangalore, similar number in Kolkata or Hyderabad.
• 55.6 million Kisan Credit Cards (KCC) issued (against
60 million credit-plus-debit cards in urban) resulting
in tremendous liquidity.
5. Rural Market Has Finally Arrived
• Some impressive facts about the Rural market
• Of 20 million Rediffmail signups, 60 % are from small
towns. 50% transactions from these towns on Rediff
online shopping site.
• No of HHs saving in formal financial instruments
(banks, mutual funds, shares etc) same in rural and
urban at 6.2 million in 2002-03
• Electricity consumption
Sector 1980 2000
Agriculture 17.6% 29.2%
Industry 58.0% 34.8%
6. Rural Income Dispersion
Consumer
Annual Income 1995-96 2006-07
Class
Very Rich Above Rs 215,000 1.6 5.6
Consuming Class Rs 45,001- 215,000 2.7 5.8
Climbers Rs 22,001- 45,000 8.3 22.4
Aspirants Rs 16,001 - 22,000 26.0 44.6
Destitutes Rs 16,000 & Below 61.4 20.2
Total 100.0 100.0
NCAER Projections Based on 7.2% GDP Growth
7. Rural Housing Pattern
(percentage)
House Type 1981 1991 2001
Pucca 22 31 41
Semi- Pucca 37 36 36
Kuccha 41 33 23
Source: Census of India
8. Distribution of Villages
Population No of villages % of total villages
Less than 200 96,855 15.7
Hardly any shops
in these 2.3 lac
200-500 1,36,454 21.4
villages
501-1000 1,56,737 24.6
1001-2000 1,40,751 22.0
2001-5000 87,206 13.7
5001-1000 20,363 3.2 17% of villages
account for 50%
Total no of villages 6,38,365 100.0 of rural
population &
60% rural wealth
Source: Census 2001
9. Distribution of Towns
Towns
80 35
72
70 30 30
61
60
25 25
50
Percentage
20
Millions
40 34
15
30 14 27 26
23 11
11 10
20 9
10 5
0 0
Top 8 Other 1 Mn+ 0.5-1 Mn 0.2-0.5 Mn 0.1-0.2 Mn < 0.1 Mn
Mn
Town With Pop
%
Source: NRS 2005
10. Distribution Of Towns Continued…
Town Class Population No. Of Towns % of Total
Class I 1 Lac above 423* 8.2
Class II 50,000 – 99,999 498 9.6 90 % of durables
purchased by
Class III 20,000 – 49,999 1386 26.9 rural people are
from these 1900
Class IV 10,000 – 19, 999 1560 30.2 towns
Class V 5000 – 9,999 1057 20.5
Class VI Less than 5000 237 4.6
Total 5161 100.0
* 10 Lac +: 27, 5 – 10 Lac: 42, 1 – 5 Lac: 354 Source: Census 2001
11. Issues In Rural Distribution
Poor road connectivity Large number of
Large number of small
intermediaries leading
markets
to higher costs
Low density of shops
Dispersed population Issues In per village and high
and trade Distribution variation in their
concentration
Highly credit-driven Inadequate banking and
market and low credit facilities for
investment capacity of Poor storage system, retailers, poor viability
retailers leading to inadequate of outlets
stocking of products
13. Rural Consumer Insights
• Rural India buys
• FMCG's more often (mostly weekly).
• Buys small packs, low unit price more important
than economy.
• Distribution and pricing are the mantras to success in
rural India.
Even expensive brands like Close up, Marie biscuits, Clinic
shampoo are doing well because of deep distribution
14. Rural Consumer Insights
• In rural India, brands rarely fight with each
other
• They just have to be present at the right place
Average Number of Brands Per Retailer
Category11
Rural Urban
Toothbrush 3 7
Toothpaste 3 6
Biscuits 3 9
Hair Oil 3 7
Source: ORG 2002
15. Rural Consumer Insights
Details Rural Urban
Average monthly sale / outlet Rs 3,000 Rs 12,500
No. of product categories
19 27
stocked per outlet
No. of brands / outlet 42 92
Average Stock Keeping Units /
62 154
outlet
Source: ORG 2002
16. Rural Consumer Insights
• Many brands are building strong rural base
without much advertising support.
• Chik shampoo, the second largest shampoo brand.
• Ghadi detergent, fourth largest brand.
• Brand recognition not through name but.
• Color (Lal Dant Manjan, Red battery)
• Numeric (555 detergent bar)
• Visual (Ghari detergent, Katchua Chaap)
• Buy value for money not cheap products.
18. Myth 1 : Rural a Homogeneous Mass
• The reality
• Heterogeneous population
• 16 languages
• State wise variations in rural demographics
• Literacy (Kerala 90%, Bihar 44%)
• Population below poverty line (Orissa 48%, Punjab
6%)
Big Land Lords
Rural Pyramid
Traders & Small Farmers
Marginal Farmers
Laborer’s & Artisans
Source: Planning Commission, GOI
19. Myth 2 : Disposable Income is Low
• The Reality
• Number of middle class HHs (annual income Rs
45,000- 2,15,000)
Rural 15.6 Million
Urban 16.4 Million
• Per Capita Annual Income
Rural Rs 9,481 (Punjab- Rs 16.5 K, Haryana- Rs 14.8 K)
Urban Rs 19,407
Source: NCAER, 2002
20. Myth 3 : Individual Decide About Purchases
• The Reality
• Decision making process is often collective
• Purchase process- influencer, decider, buyer, one
who pays can all be different.
• Marketers must address brand message at several
levels
• Rural youth brings brand knowledge to House Hold
22. Infrastructure Improving Rapidly
• In 50 years only 40% villages connected by
road, in next 10 years another 30%.
• > 90 % villages electrified, though only 44%
rural homes have electric connections.
23. Infrastructure Improving Rapidly
• Rural telephone density has gone up by 148% in
the last 5 years, every 500+ pop is connected
by STD.
• 18.8 million individual phone connections.
• Levels of literacy are up.
Rural Tele-density (phones per 100)
Division 2000 2005 % increase
Rural 0.7 1.74 148%
Urban 8.2 26.2 220%
All 2.9 9.08 213%
Source: TRAI, 2005 & Census 2001
24. Infrastructure Improving Rapidly
• 70% of R1,R2, R3 can be reached through mass
media.
70
53
41 SEC wise Rural HH
R1 - 4%
26
R2 - 11%
21 R3 - 39%
14 R4 - 46%
Satellite Radio Press Cinema TV All Media
TV
Source: IRS 2001 & 2005
31. Challenge
• Reaching the product to remote rural locations
and entering more rural homes (penetration)
• Increasing rural incomes (market growth)
32. Challenges
• Making effective use of the large available
infrastructure
• Post offices 1,38,000
• PCOs 2,00,000
• Haats (periodic markets) 42,000
• Melas (exhibitions) 25,000
• Mandis (agri markets) 7,000
• Public distribution shops 3,80,000
• Bank branches 32,000
33. New Wave
• There are some large format rural retail stores
• DSCL Haryali stores
• M & M Shubh Labh stores
• TATA/Rallis Kisan Kendras
• Escorts rural stores
• Warna bazaar, Maharashtra (annual sale Rs 50 crore)
• ITC Choupal Sagar
34. Some Possible directions….
• Long term commitment to rural. Create a dedicated
rural vertical
• Grow size of rural pie: Public-Private partnerships
• Create rural specific Products and communication
• Explore new Distribution models – mobile traders, NYKS
volunteers etc
• Understand & profile Rural Consumers: Do not go by our
urban bias..
• Organize rural sensitization training for managers
• Rural Marketing is not “unglamorous” … message for
potential employees.
35. Quote - Unquote
• The future lies with those companies who see
the poor as their customers.
C K Prahalad
• To get rich, sell to the poor.
Pradeep Kashyap
39. Women Self Help Groups
• Group of 10-15 women
who come together to
form a mutual thrift
society, supported by
Government or NGOs
• Micro credit from the
rural banks to set up
enterprises.
• Rapid snowballing of the
SHG movement in India
• Over 1 million groups in
existence today
40. Project “Shakti”
• Rural Distribution
Model: HLL - Self
Help Groups
• Existing coverage of
brands in 2,000+ pop
villages. Need to
penetrate deeper
• Women appointed as
dealers, sell to
members of SHG, also
retailers in 3-4
villages. 20 dealers
per district.
41. Project “Shakti”
• Project
• Conceptualization, Pilot,
national rollout
• Identification & selection
of potential Shakti dealers
• Capacity Building of Shakti
dealer to become
entrepreneurs
• Assisting in getting finance
from banks
• Link up to HLL distribution
network
• Roll out completed in 12
states, 15000 Shakti
dealers appointed
44. Rural Youth
• Educated rural youth work with voluntary
organizations (NYKS, NGO, Youth clubs) in rural
areas.
• They learn communicating and mobilization
skills while working on various development
projects.
• Development projects are time bound and
these skilled rural youth are available for
corporate assignments.
45. Successful Models….
• Study of the Volunteer model ….to reach the
last mile
• Recruit class 10+, rural youth (18-30 age) with skills
in communication and community mobilization
• Build their skills in product and brand
communication (customized to company)
• Build their skills in salesmanship
• Deploy them to take corporate brands into the
hinterland and rural households.
46. Model - Operationalized
• Trained volunteer is
provided a branded
bicycle, umbrella and a
box to carry ready
stocks.
• He wears a branded T-
shirt and a cap
• Route Plans, PJPs and
JCs are developed for
him to cover uncovered
markets
• He is attached to the
rural distributor from
where he picks up stock
on cash-n-carry
47. The Model
• Market coverage
• Daily visit to uncovered
areas (>2000 pop strata)
• Retailers in 4 villages or
• 1 Haat and 2 villages in a
day
• Covers villages within
10km radius from own
village
• Retailer sale at trade
margins and Haat sale at
price close to MRP
• Communication
• Focuses on Brand
Recognition to fight
menace of spurious
• Communicates Brand
benefits
• Puts banners, posters etc
48. Pilot Results
• Coverage of
• At least 4 Haats every week
• 30 villages
• Average daily sale generated Rs 700 / Youth
• Cost to company Rs 3000 / youth / month
(against Rs 3000 / day van cost)
• 250 youth placed in state of Uttar Pradesh.