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Bop consumers and rural marketing
This document discusses Nestle's business strategies for reaching rural and bottom of the pyramid (BOP) consumers. It outlines Nestle's product portfolio, distribution models, and marketing approaches for tapping into this large consumer segment. Specifically, it describes Nestle's focus on (1) small and affordable product sizes, (2) subsidizing rural distribution costs, and (3) culturally relevant local promotions and engagement activities. Case studies of other FMCG companies' rural strategies are also provided. The challenges of inflation and decreasing consumer purchasing power in Pakistan are raised as important factors for companies to address.
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Bop consumers and rural marketing
- 1. Rural Marketing & BOPConsumers
- 2. IntroductionTrade Structure &BOP ConsumersNestle & Other FMCG Case Studies Agenda
- 3. Nestlé: Good Food,Good Life The world’s leading nutrition, health and wellness company Corporate Essence – Improving Quality of Life
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- 5. Nestle vs. OurCompetitors
- 6. The Nestlé story– how it all began 1867 1866 1929 1938 1947 1960s 1970s 1980s 1990s 2000s Henri Nestlé 1866 2010
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- 8. Sales by ProductGroup
- 9. Nestlé tailors itsproducts to suit local tastes and needs Over 200 different blends of Nescafé to meet consumers' expectations Malaysia Japan RussiaPoland Africa,Greece Russia, Israel SwitzerlandEurope Local Tastes needs Local Production
- 10. Billionaire Brands (Brands OverCHF 1 Billion)
- 11. Nutrition PPP Out of Home Premium& Luxury Strategic Growth Drivers
- 12. Sales in excessof CHF 11 Bn Four Key Areas a) Infant Nutrition b) Healthcare Nutrition c) Performance Nutrition d) Personalized Weight Management Nestle Nutrition The World Leader in Nutrition
- 13. Out Of Home NestleProfessional World Leader in Branded Food Solutions Tailor Made meal solution for food operators In industralized world 50% of food spending is out of home
- 14. More than justproducts – the complete experience Nestle Nespresso Premium Chocolate Luxury Ice Creams Pet Foods Premium & Luxury Products
- 15. Emerging Markets –Popularly Positioned Products (PPP) Meet nutritional needs in developing countries -Low price -High nutritional Value -Smaller & affordable pack sizes Different Business model, different advertising, micro distributions
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- 17. Wholesale Retail Modern Trade Wholesale Family Grocers Pharmacy/MassRetail Small Stores Changing Market Place
- 18. Modern Trade Customersare getting….. Bigger Smarter Smarter Broader More diversified Bigger
- 19. 19 As well aschasing shoppers locally, they have continued to follow them internationally 2010 Source: Planet Retail
- 20. How important arethey to Nestlé?
- 21. Source: SGDU, GlobalBW & F&C-CGR Customers within Top 20 Markets (NPS Full Year 2008 in mio CHF) 8'216 7'009 4'286 3'922 3'323 2'598 2'597 2'264 2'133 1'977 1'778 1'695 1'675 1'584 1'514 1'512 1'485 1'362 1'260 1'173 1'126 1'123 1'098 1'064 1'060 1'052 11'923 4'652 4'376 USAW alm artNPP NAGerm anyFrance Brazil NPP EURCarrefour UKM exicoOceania Italy SpainRussia Philippines reaterChina KrogerSchwarz Tesco JapanCanada VenezuelaAuchan M iddle EastEdeka M etroM Y /SG SuperValu Israel 9 customers within Top 20 Markets 12 “Billionaire” Customers Our largest customer are already as big as our business in countries
- 22. There is hugeopportunity within ‘small’ shops to build our business. 22
- 23. Nestlé is theworld’s largest food and beverages company but is still only 1.7% of the market Nestlé ~ 1.7% The 20 largest food companies account for less than 9% of the world market
- 24. World Income Pyramid Rs. 160,000per month Rs. 12,500 - 160,000 per month Rs. 12,500 per month 70%
- 25. 25 Americas 46.8% Asia, Oceania, Africa 23.8% Europe 29.4% 75%of World‘s Population Sales by Region Nestle
- 26. The Nestle PPPVision NESTLE WILL EXTEND DOWN IN THE ECONOMIC PYRAMID TO REACH CONSUMERS WITH LOWER INCOMES AND BRING THEM AFFORDABLE, HEALTHY AND NUTRITION SOLUTIONS, JOINING THEM ON THEIR JOURNEY TO BETTER LIFE..
- 27. In Paistan’s Scenario BOP strategyis incomplete without the Rural
- 28. 68% Population 32%Population
- 29. Source : NielsenPakistan 626,649 639,680 645,349 270,636 281,827 289,774 356,013 357,853 355,575 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 2008 2009 2010 National Urban Rural 56% Evolution of Retail Universe
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- 31. Key Factors In PPP/ BOP Consumers Strategy
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- 35. Trade Off Between DistributionCost & Incremental Penetration Vast Geographical Spread
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- 37. Low Consumer DisposableIncome & Limited Purchasing Capacity of Retailers Avg. Monthly Consumption Rs.8945/- Vs. Income Rs.10,929/-
- 38. Dependent Upon Vagaries OfMonsoon
- 39. Assortments Carried Smaller SKU’sof Branded Items Karyana Items Unrelated Items Vegetables, Ice etc
- 40. Sno. Content Marks 1Company Background and info. 2 Industry analysis 2 3 Available Dist. Models and one Opted 2 4 Setting up Dist. Financial Requirements Sales models and channels HR & Infrastructure Requirements Warehousing 4 5 Financials (ROI, P&L, Breakeven) 2 6 Creativity & Advanced Details 3 7 Final Presentation 3 Total 16 Semester Report Deadline 25th April 2013
- 41. Ideas For Effective PPP/ BOP Strategy
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- 43. Smaller SKUs Single Serving (percapita or per time period)
- 44. Mainly due toilliteracy Distinctive Packaging Brands are identified & differentiated on basis of color
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- 48. Attractive Price Points Rs.10sachet contributes around 50% in surf sales Rs.10 sachet major growth driver for powder creamer Rs.10 sachet rapidly growing despite challenges from smuggled tea
- 49. Per Gram Costing BrandLarge SKU Sachet Surf Excel 0.20 0.17 Everyday Tea Whitener 0.43 0.40 Sunsilk Shampoo 0.78 0.60 Cheaper Small SKUs enhances consumer acceptance
- 50. Attractive Retail Margins ForRetail Penetration & Advocacy
- 51. Brand Large SKUSachet Surf Excel 4.7% 5.5% Supreme Tea 5.1% 11.1% Everyday Tea Whitener 8% 10% Sunsilk Shampoo 9.7% 9.7% Better Retail Margins on Small SKUs improves retail penetration Retail Margins
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- 53. Connect in MoreUnderstandable Way Use local dialects to engage consumers
- 54. Use Customized Media Nestle MaggiMuhallah Shows & sampling Guddi Baji Unilever Pakistan Everyday sachet wet and dry sampling Village Promotion Activities based on fastivals & Consumer Shows Use of FM Radio
- 55. Sales & Display Competition Merchandising Corporate Consumer Offer TownFestivals Prize Distribution Ceremony Rural Strategy – Town Storming
- 56. Trade Engagement Activities SachetDisplay Drives P&G Golden Stores 2% for Displays Unilever Project Interface paying 6-7% & Perfect Shops for small stores
- 57. Contribute Towards theSociety CSR Activities creates a positive brand/company image
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- 59. These wholesalers suppliesproduct to rural retailers. Products supplied included branded & loose (unbranded items) Traditional Rural Distribution System Distributor Retailers Wholesellers Wholesale Channel Playing Dominant Role
- 60. Product directly distributedto rural retailers ensuing product availability & minimizing the influence of wholesale Direct Rural Distribution System Distributor Retailers Wholesellers Direct Distribution to Rural Retailers
- 61. Major Hurdle in DirectDistribution Cost of Distribution
- 62. …which is overcomeby subsidizing rural distributions Subsidy varies from 50% t0 100% of expenses
- 63. Heads Unilever (50% sharing) Unilever(Retail Extension program 100% sharing) Rentals (Rs. 700/day @ 25 days) 17,500 17,500 Fuel (Rs. 5/km cost & avg. 50 km/day) 6,250 6,250 Salesman Salary 7,500 7,500 Loader Salary 4,500 4,500 Total Cost 35,750 35,750 Breakeven Sales (assuming 3.5% avg. dist. margin) 1,021,428 1,021,428 Estimated sub-dist margin ( at 3.5% net margin ) 35,000 (assuming Rs.40,000 sales/day) 35,000 (assuming Rs.40,000 sales/day) Company Sharing 17,875 (50% cost sharing) 35,750 (100% cost sharing) Net Dist Margin 17,125 (1.7%) 35,000 (3.4%) Subsidy Van Costing Unilever Subsidizing its rural distributors This subsidy varies from 50% to 100% in (Retail Extension Program) This subsidy helps in improving distributors ROI & numeric expansion resulting in overall rural stronghold An Example Of How Subsidy Helps
- 64. …make distribution infrastructure SelfSustaining Through Subsidy…
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- 67. Micro Nutrition Issues -Iron (49% among young children) - Vitamin B2 - Calcium - Vitamin C - Vitamin A - Iodine and zinc likely Health Concerns - Stunting (41% of young children) - Diarrhea - Polluted water (arsenic, bacteria) Macro Nutrition Issues - 87% of protein source is vegetal (lentils and beans), deficiency in essential amino- acids likely - Overall energy deficiency, particularly among young children (between 24% and 40% gap vs RDA) - Protein deficiency Addressing the Nutritional Deficiency
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- 72. Maggi India Case Currentportfolio tapping just 14% population
- 73. Project Epicure Largest Researchstudy conducted covering 42,000 meal occasions & 100, 000 dishes What makes a housewife please her family and provide nutrition All to be done in Rs. 40 for a meal of entire family
- 74. …their food habits& life
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- 76. Launched Maggi Masala-ae-Magic Anaffordable, fortified taste enhancer
- 77. Out of BoxMarketing Strategy
- 78. Extremely Encouraging Results Productwell accepted by trade & consumers Volumes growing month on month Ground level efforts already highly recognized by media
- 79. For Nestle Pakistan Thefastest growing Market for Nestle with ever increasing penetration in BOP segment… Nestle Pakistan
- 80.
- 81. Inflation Shrinking consumer disposable income 21% 12% Inflation 2009 2010 15% 2011 Maintaingprice points becoming difficult for companies Increasing Distribution cost & struggling ROIs of distributors
- 82. Attractive Price Points Rs.10sachet contributes 50% plus in surf sales Rs.10 sachet major growth driver for powder creamer Rs.10 sachet rapidly growing despite challenges from smuggled tea Surf Excel promoting Rs. 15 SKU Price Increase to Rs. 12 Decreasing weight
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- 84. So Companies Needto be very ….
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- 88.
- 90. Thank You ForYour Time