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Rural market  oppurtunities & challenges
 

Rural market oppurtunities & challenges

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understanding rural india

understanding rural india

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    Rural market  oppurtunities & challenges Rural market oppurtunities & challenges Presentation Transcript

    • Rural Marketing – Issues ,Opportunities & Challenges Presentation by Peshwa Acharya
    • Indian RuralThe Macro Scenario
    • Rural Market Has Finally Arrived•  742 million people•  Rural is bigger than urban •  FMCGs 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
    • 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.
    • 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%
    • Rural Income Dispersion Consumer Annual Income 1995-96 2006-07 Class Very Rich Above Rs 215,000 1.6 5.6Consuming 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
    • Rural Housing Pattern (percentage)House Type 1981 1991 2001 Pucca 22 31 41Semi- Pucca 37 36 36 Kuccha 41 33 23 Source: Census of India
    • Distribution of Villages Population No of villages % of total villagesLess than 200 96,855 15.7 Hardly any shops in these 2.3 lac200-500 1,36,454 21.4 villages501-1000 1,56,737 24.61001-2000 1,40,751 22.02001-5000 87,206 13.75001-1000 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
    • 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
    • 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
    • Issues In Rural Distribution Poor road connectivity Large number ofLarge number of small intermediaries leading markets to higher costs Low density of shopsDispersed 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 forinvestment capacity of Poor storage system, retailers, poor viability retailers leading to inadequate of outlets stocking of products
    • InsightsThe Rural Consumer
    • Rural Consumer Insights•  Rural India buys •  FMCGs 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
    • 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
    • Rural Consumer Insights Details Rural UrbanAverage monthly sale / outlet Rs 3,000 Rs 12,500 No. of product categories 19 27 stocked per outlet No. of brands / outlet 42 92Average Stock Keeping Units / 62 154 outlet Source: ORG 2002
    • 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.
    • Rural MythsPerception vs. Reality
    • 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 & ArtisansSource: Planning Commission, GOI
    • 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
    • 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
    • India’s RuralWhat’s Changing
    • 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.
    • 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
    • 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
    • Rural MarketOpportunities & Challenges
    • Marketing Opportunities•  Low penetration in rural Per 1000 HH FMCG’s Urban Rural Total Toothpaste 749 376 486 Soft Drinks 370 122 198 Mosquito Repellent 541 152 267 Coffee 232 79 125 Skin Cream 315 178 220 Health Beverage 188 47 88 Source: IRS 2005
    • Marketing Opportunities•  Low penetration among lower pop strata villages and SEC R3/R4 Penetration of Durables and FMCG (% of HH) Product Category Pop Strata (Villages) SEC 5K+ 1K-5K <1K R1/R2 R3/R4 Radio 14.1 14.5 14.4 24.4 12.7 CTV 18.5 9.7 7.1 30.1 7.8 Telephone 12.7 5.3 3.7 23.6 3.6 Toilet Soap 92.4 88.2 87.2 96.0 87.7 Shampoo 35.3 33.1 24.6 47.5 29.2 Toothpaste 49.5 36.0 29.1 69.1 32.1 Soft Drinks 16.0 12.3 7.8 22.7 10.4Mosquito Repellents 22.4 14.8 8.4 31.2 12.4 Source: IRS 2005
    • Marketing Opportunities •  Rapidly growing product categories and largest rural brands in rural markets Rural Growth of FMCG and Durables (% of HH) Largest Rural Brands Product Category 2000 2005 Growth (%) Brand Category Growth (%) CTV 3.7 11.1 217.6 Parle-G Biscuits 8.2 Motorcycle 3.0 5.3 76.7 Lifebuoy Toilet Soap 6.4 Refrigerator 3.2 4.2 31.3 Active Tractor 1.8 2.3 27.8 Lux Toilet Soap 5.6 Shampoo 13.3 31.9 213.7 Ghari W. Powder 21.5Packaged Edible Oil 8.7 13.7 57.5 Nirma W. Powder -13.1Packaged Biscuits 39.1 54.2 38.6 Figures are year-on-year growth for Soft Drinks 9.8 12.2 24.5 MAT July 2004 by Value Source: AC Nielsen Retail Store AuditBase: All Rural Households Source: IRS,2005
    • Marketing Opportunities•  SEC wise rural households •  R1 - 4% •  R2 - 11% •  R3 - 39% •  R4 - 46%•  Rich HHs FMCGs Annual Consumption Urban Rural Rs 13,000 Rs 9,400•  Rural consumption volumes (R1+R2+R3) •  Toothpaste 88% •  Toothpowder 79% So this half of the population consumes •  Shampoo 88% over 75% of FMCG volumes
    • Challenges In future
    • Challenge•  Reaching the product to remote rural locations and entering more rural homes (penetration)•  Increasing rural incomes (market growth)
    • 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
    • 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
    • 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.
    • 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
    • Connecting To Bharat Innovative Solutions
    • Project “Shakti”HLL – Rural Distribution Model
    • Rural Coverage Strategic Situation High Combined IDC Indirect CoverageMarket Access 2-5k 5k+ Shakti Streamline Low <2k 2-5k Low High Turnover / market
    • 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
    • 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.
    • 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
    • Shakti Vision•  Shakti now •  15000 Shakti Entrepreneurs •  50000 villages •  10 Million Consumer •  Turnover 128 Crore•  Shakti Vision 2006 •  25,000 Shakti Entrepreneurs •  100,000 villages •  100 million consumer •  Turnover 1000 Crores
    • Reaching The Last Mile The Volunteer Model
    • 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.
    • 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.
    • 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
    • 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
    • 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.