How to leverage rural market potential of Indian Pharmaceutical Market


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This presentation highlights the key features of Rural-Pharmaceutical market in India and discuss key success factors.

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  • References:
    Understanding Rural Potential, ZENITH International Journal of Multidisciplinary Research Vol.1 Issue 6, October 2011, ISSN 2231 5780 ,
  • Pharma companies have seen growth rate of their rural market sales doubling on the back of aggressive marketing initiatives. Improved access to healthcare and rising incomes have seen a stronger perk-up in the underserved rural market over the past year.
    For the 12 months period ended April 2011, India's rural drug market grew 18.8% compared with 10.9% in the previous year. This is a sharp jump from the growth rate in the same period of 2009, when the rural market had actually shrunk by 2.1%
  • How to leverage rural market potential of Indian Pharmaceutical Market

    1. 1. Leveraging Rural Market Potential Indian Pharmaceutical Market
    2. 2. Some facts about rural India 1% increase in rural income Buying Power of Rs.10,000 Crore ~ Two-third of Middle-income households Live in rural India ~ 50% India’s Buying Potential Lies in Villages ZENITH International Journal of Multidisciplinary Research Vol.1 Issue 6, October 2011, ISSN 2231 5780
    3. 3. Gigantic market size of rural India  73% of population lives in rural India ~ 720 million customers  Rural population accounts for 12% of the world's population – as large as the market of USA or Russia  25% of all villages account for 65% of the total rural population  60% of India's US$15 billion annual consumption of gold and gold jewelry is from rural and semi-urban areas Growth Propellers •Government initiatives and schemes •Infrastructure development •Industry projects across the country •Emphasis on local-employability
    4. 4. FMCGs have successfully leveraged the opportunity Company % Contribution in sales Asian Paints 60% Dabur 40% Videocon 40% Colgate 50% HLL > 50%
    5. 5. Disposable household income levels set to rise significantly in rural markets Changing income pyramid in rural India Annual per capita disposable household income in rural regions Percent USD 631 +54% 516 411 Disposable Income = The amount of money that households have available for spending and saving after income taxes have been accounted for. Source: Mckinsey Global Institute- The Bird of Gold: The Rise of India’s Consumer Market
    6. 6. Driving accessibility in untapped extra urban markets can have significant impact on growth of pharmaceuticals Extra urban = Tier 2 + Rural Acceptability Affordability More than 28 Million households (~20%) will climb out of the deprived income growth Accessibility Epidemiological factors 2009 -20 Growth Drivers Increased Pharma spend * /household income (+ 140%– 200%) + Health coverage (Rashtriya + Swasthya Bima Yojana+) will further enhance the affordability for healthcare High levels of healthcare spend in extra urban markets * Based on share of wallet spend on healthcare in each income class and average spend of 16% on Pharma within healthcare across classes + The empanelled list includes Private hospitals Source: McKinsey Global Institute-The Bird of Gold: The Rise of India’s Consumer Market
    7. 7. Rural markets contribute to one fourth of Indian pharmaceutical market
    8. 8. Improving Socio-economic profile of rural India will provide further impetus for growing rural pharmaceutical market Market with a size of > $ 3 Billion Extra urban = Tier 2 + Rural l Rura and I to V 13 % s II : yrs Clas R5 For CAG Rural Market Apr MAT 2011: (15%) 18.8% (4%) (16%) 3.2 (17%) 2.7 2.8 2.3 2 5.4 3 MAT 04/2006 MAT 04/2007 3.9 3.4 MAT 04/2008 Metro + Class I ($ bn) *Source : ORG ims SSA Audit MAT April 2010 4.4 MAT 04/2009 MAT 04/2010 Class II to VI and Rural ($ bn) 1 USD : 49.5 INR ( ) value growth for Class II to VI and Rural
    9. 9. Players have adopted varied strategies to leverage the rural opportunity Re-Engineering Products, pricing and packaging 1. Godrej has introduced chotukool refrigerator 2. Vortex has launched low cost ATMs 3. Nokia has developed Life tools - a mobile application that provides access to agricultural, educational and entertainment content. Sold by Village girls For Rs.150/- margin Reported user base 1.5 million SBI deployed 545 ATMs across semi-urban and rural India
    10. 10. Players have adopted varied strategies to leverage the rural opportunity Re-Engineering Communication and distribution channels 1. Tata Tea's 'Gaon Chalo' 2. HUL's Project Shakti; 3. ITC e-choupal In One year added 20,000 retailers, 500 new rural distributors in 10,000 villages in UP Rural Women became direct-to-consumer sales distributors for Hindustan Lever’s soaps and shampoos. More than 45 000 Shakti entrepreneurs covering 3 million homes in 100 000 villages in 15 states .
    11. 11. What differentiates Rural Markets from Urban markets? 1.Reach 2.Living Standards 3.Economic gap 4.Product awareness 5.Education 6.Channel of Communication 7.Channel of distribution 8.High importance to “Value for money” than Brand 9.Heterogenic market nature
    12. 12. Strategies must address the differences between urban and rural market to succeed Aspect 1 Philosophy 2 3 4 5 6 7 Competition Literacy Income Adoption Quality Transportation 8 Advertising Urban Rural Marketing & Social Concept Development & Relationship marketing Organized Sector Unorganized Sector High Low High Low Faster Slow Good Moderate Good Average Print, audio visual, outdoors. TV, Radio, print media in many languages
    13. 13. Success in rural markets need to add 4 A to Product mix 4P PRODUCT PACKING PLACE PRICE 4A AVAILABILITY AFFORDABILITY ACCEPTABILITY AWARENESS Rural Markets
    14. 14. THANK YOU For any further discussion on this topic, author can be reached at 14