RURAL MARKET Class Notes.pptx

7/27/2019 RURAL MARKET Class Notes.pptx

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The Indian Rural MarketA Snapshot

1

Anirban Basu


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Roadmap

Definition & The Rural Landscape

The Rural opportunity

What is driving the Rural opportunity?

Companies tapping into Rural

Communication Strategy

4 As for Rural

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What Constitutes Rural?

Definitions of RuralCensus-

Definition of

Rural

Rural defined as place which is not Urban

Urban defined as any place with density of population > 400/ sq km or with

Local Self Govt (municipality etc) with more than 75% of male population

not engaged in agriculture

NABARD All locations irrespective of villages or town, up to a population of 10,000 isconsidered as rural operationally

Planning

Commission

Habitations/ Towns with population up to 15,000 are considered together for

planning proposes

CompaniesFor many companies

- In FMCG Category up to 20,000 population

- For Durables up to 50,000 population

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Our suggested definitionVillages constitute Rural to clearly target the Gaon


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Rural Consumers: SEC Segmentation

Source : IRS,2008

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SEC segmentation can lead to an indication of typical consumer profiles at each level


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Rural Pyramid

R1

9.2

R2

31.1

R4/R5

50.5

R3

47.3

B

17.3

C

25.1

E

16.8

D

29.7

A2

7.1

HH 238 Mio

Households

AI

21

R1

46.9

R2

158.4

R4/R5

257.3

R3

241

B

83

C

121

E

81

D

143

A2

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POPULATION 1186 Mio

Population

AI

4.2

5

The Urban SEC Grid, which uses Education levels and Occupational criteria of the Chief Wage Earner (CWE) of a household as measures todetermine socio-economic classification, and segments urban India into 7 groups (A1 to E2) and

The Rural SEC Grid, which uses Education and Type of House (pucca, semi-pucca, and katcha) as measures of socio-economic class, andsegments rural India into 4 groups (R1,R2,R3,R4 & R5)


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Population Spread

The rural proportion will fall, but continue to rise in numbers

India will continue to

live in its villages

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Rural Markets -Heterogeneous

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Distribution of Villages half of the population stays in 17% villages

Source : Census 2001

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Rural Economic outlays inclusive growth

In just 3 years: 2007-08 to 2010-11

Outlays on Bharat Nirman scheme doubled from Rs 24,600 cr to Rs 48,000 cr

Outlays on NREGA shot up 3 fold Rs 12,000 cr to Rs 40,000 cr

Agricultural credit in 2010-11 is planned to be a whopping Rs 3,75,000 cr

Government give away on rural credit, employment & infrastructure to

continue

In addition, prices of agricultural products have gone up significantly over

the last 18-24 months some return in the farmers hands

x2

x3

+66% in 3 years

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Composition of Rural Income

Decreasing dependence on farm incomemore financial stability

Traditional rural income sources from farmingnow changing

Typically at least one person from farming households is employed in service sector regular

monthly incomes allowing planned expenditure.

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Rural Distribution

Build models to cover the

right villages

.and generate awareness

and demand in those!

Not effective to cherry pick Rural stores due

to travel distances

Easier to Saturate the Village when we go

Key villages also starting points to drive

Awareness

79K Villages

60% WD

1.6 MM Total

Stores

1/3 Rural HHs (62MM)

3.5 Mn Stores

135 Mn. HHs

RuralACV%

Rural distribution -79K villages achieve 60% ACVRight Villages rather than Stores


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Rural Household Spending

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Changing Demographics & Increasing consumption

Rise in literacy levels and youth dominant market led to 2-3 times consumption growth in many categories

Source : IRS, Hansa Research & Population projection India 2001-26, Census o f India

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Rural demographic and

product consumption

2000 2005 2008

Literacy (male) 67 72 74

Literacy (female) 38 44 48

10th+ education in HHs 31 35 37


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Town Dispersion

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Size of Rural Markets

FMCG Rs.65000 crore

Agri-inputs Rs.45000 crore

Durables Rs.5000 crore

Automobiles (2 & 4 Wheelers) Rs.8000 crore

Clothes, footwear etc. Rs.35000 crore

Construction material Rs.15000 crore

Total Rs.173000 crore

Source: CII Report (2008)


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200 Million Target Rural Consumers Opportunity

Source : NCAER,at current prices, with HH incomes converted into per-capita at Urban HH=4.81, Rural=5.09, IRS

Total Pop = 1186 Mio

21 Mio

164 Mio

422 Mio

579 Mio

USD 5500

USD 1100

USD 500

Global

India

Deprived India

Aspiring India

Seeking &Striving India

PCI pa

205 Mio -

Rural

Potential

Consumers

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Population (In Mio)

1 Mio+Towns

0.1 - 1 MioTowns

< 0.1 MioTowns

RURAL

14 5 2

54 36 27 47

110 79 75 158

27 25 30 498


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Rural Market: Untapped & Under-Served

Spread across 650,000 villages,

with an average population of1100 per village

Rural India buys 46% of softdrinks, 49% of motorcycles, 59%

of cigarettes sold; Rural Indiaaccounts for 40% of Nokia

Indias $5 bio annual revenue

Functional, specific purposecategories with tangible utility

growing well

Television, Mobiles

Mosquito repellent, digestives

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Getting cracking on rural marketsTop 10 markets:Punjab,Haryana,UP,Maharashtra,Gujarat,TN,Kerala,AP,Karnataka,WB

High growth in Bihar Orissa, etc


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6 key aspects of consumer mindset

Value orientation high (Price points, right quality products at right price)

One/ two simple and key rules & drivers for category & brand choice (e.g.color in tea, strength in coffee in rural Andhra Pradesh)

Practicality (clear and easy to use an operate/prepare)

Visual driven in approach (show me rather than tell me alone)

Brand trust key (Take to brands slowly & give up slowly, Trust in brands

important as cant go wrong, see others before bringing brands, buy into a brandpromise at an affordable price)

Opinion leaders influence important (Village elders, Aaganwadi, doctor etc.)

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Route to Brand Building in Rural

Build customization

Build Empathy / Relevance

Build Recognition


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Build customization

Godrej Chotu Kool

Specially designed refrigerator for the

Indian hinterland, a nano refrigerator

(43 litres cool box loaded from top)

Co-created using suggestions from

rural women and sold by rural women

Red colour, only 7.8kg, Price Rs.

3200, Runs on battery even, has no

compressor

Godrej No. 1

Soap, with simple branding (No.1) &

traditional ingredients

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http://www.new.godrej.com/godrej/godrej/index.aspx?id=1


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Build Empathy / Relevance

Nokia Life Tools for farming and rural community

Agri-information to farmers in association withReuters

Imparting of knowledge of English language tostudents by teaching one new word every day

Rural folks understands symbols and colors better:

Pahelwan Chap MRF

Haathi Beedi

Laal Sabun Lifebuoy

Peela Powder - Nirma

Build Recognition


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Pitfalls This also leads to duplicates and spurious products

Largely sold in the Haats (weekly markets) in Rural India

Rs.12000 crore p.a. is the estimated loss to FMCG sector


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Colgate Cycle boy RTM for Rural

Identify educated, unemployed youth in villages as potential

channel partners for Colgate products

Selected youth act as entrepreneurs, paying cash for stock

and earning from sale of products

To keep costs low, youth travel by bicycle with a stock box

attached for product storage

Makeshift stall, using a branded umbrella, erected at venue

to attract buyers

Branding of channel partner through company logos on T-

shirt, bicycle and box to increase visibility and ensureauthenticity

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Hero Honda Har Gaon Har Aangan

Created & trained 500 rural Sales Executives

Engaged a person from the target audience to sell

motorcycles to others

Conducted meetings with Sarpanches, headmasters,

anganwadi workers

Charted out events like festivals, marriages, harvests in the

villages to take advantage of the cash holding capacity of

villagers

Vehicle finance tie ups with NBFCs, Cooperative banks,

Regional rural banks

From 2000 distribution contact points for Rural in 2000 to

4000 in 2009

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Castrol Rural Activation: Agricultural

Modernization program for Tractor owners

Key Target

Successful village farmer (a reference for fellow farmers)

Program-Operation Attack

Modernization of agricultural practices

Education of farmers on better yield, tilling practices

Message on usage of tractors & Castrol CRB usage

increasing the life of the tractor, technical knowledge

Top 110 districts targeted Contributing 56% of total sales

& 61% of tractor owners universe

Results: 18% incremental sales

Vehicles used: Bus talkies & live technical demonstration

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Initiative to educate consumers on new products. Brooke

Bond Sahetmand Chai launched in rural areas starting from

the states of MP and Chhattisgarh.

The brand visited around 700 800 villages across 5 6

districts in this region to start with creating awareness on

health and the goodness of having nutritious food.

The brand is in the process of running a tutorial via the

mobile which needs to be amplified through a megaphone.

Ability to drive campaign across 700 800 villages

simultaneously using automated calls to the schoolmasters mobile phone which was amplified for the

kids/mothers to listen. Could reach interiors and rural areas

through this campaign.

Brookebond Sehatmand Rural Activation


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Life Insurance programs

Yeshasvini Cooperative Farmers Health

scheme

Public Private partnership

Insurance Premiums from Rs 5 onwards

Bima Gulak - Max Vijay

Partnerships with local Agents, NGOs

Premiums start as low as Rs. 1000/- and top-ups

@ Rs 10+ per day

One size does not fit all

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HPCL - Rasoi Ghar

Women from SHG (Self help group) is a caretaker

Local panchyat contributes a room (10x10)

Women bring basic materials & pay Rs. 2-3 for half hour for

using gas and take away cooked food home

Rasoi Ghar is a village for few months till sizeable individual

connections set up & then moves to another village

Demonstration of LGP benefits

Clean, convenient, safe cooking, pollution free

5kg cylinder SKU with an initial connection cost of Rs. 800 and

refill at Rs. 95 introduced

Communication of release of time for better utilisation for

better child care, domestic chores, etc.

Petroleum ministry has approved 80,000 Rasoi Ghars

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ICICI - Kamdhenu

ICICI Bank: Cattle loan + ICICI Lombard

General Insurance

Easy cattle loan

Awareness of rural consumers about

hedging their economic loss in the event of

injury or loss of cattle

Top 50 districts program

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Communicating to win over

Rural consumers - Coca Cola example

Thanda matlab Coca Cola television campaign (targeted at 26% of Ruralhouseholds having a television)

Thanda means cold drink

Local, common language

Dialogue became part of common parlance

Local idiom

Communication execution

Out of a common mans life

Rural setting

Hero was a normal guy, a common man, a farmer or a clerk

People warmed up across India to that as the country was becoming more confident

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Coca Cola Jalsa

Folk fare & show Entertainment show

organized in villages with an audience

base of 10,000+ (folk dance, poetry, play

dance & contest basis the tickets as well

lucky draw)

Show entry through product purchase

(1 free ticket with every 500ml bottle)

Micro nutrient drink Vitingo introduced in

the rural areas (18g sachet at Rs. 2.50)

affordable nutritional beverage

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Mahindra - From Transactional to Emotional bonding

Mahindra Bhoomi Information for better

Agriculture

Mobile soil testing laboratory vans to assist

farmers & also static soil testing labs

attached to Mahindra dealerships

Activity touched 30,000 farmers, footfalls in

dealerships increased by 4-5%

Mahindra Swasth Tractor Scheme

Tractor check

Health check for Rural denizens

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Tata Tea RTM approach with NGOs

Leverage NGO penetration in Rural UP through

which rural entrepreneurs were identified to

supply to rural retailers

Leverage the super - stockiest network,

wholesale channel and village haats

20,000 retailers in 10,000 villages were added

and market share increased from 18% to 27%

between 2006-2008 in UP

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Dabur Amla Rural Activation

Dabur Amla Banke Dikhao Rani

Rural beauty & talent hunt

Recognises & Rewards sundarata, Susheelta & Yogayataamong young girls

Enlarge beauty & confidence of rural women

Contest across 52 districts in UP, MP, Bihar covering 2000

villages

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Rural Distribution Company BenchmarkingHUL reaches 83.3% of stores, with P&G the next best distributed company

reaching just over 64% of the stores; Nestle reaches about 39% of the store universe

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83.3%

64.0%

62.2%

60.0%

58.1%

53.2%

50.2%

47.7%

47.2%

46.6%

43.9%

42.1%

41.5%

40.5%

39.0%

36.9%

36.2%

35.3%

33.3%

29.5%

27.6%

27.2%

25.0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

HINDUSTAN UNILEVER LIMITED

PROCTER & GAMBLE

DABUR

PARLE PRODS

COLGATE-PALMOLIVEEMAMI

CAVINKARE

GODREJ CONSUMER PRODS

RECKITT BENCKISER

I T C

MARICO INDS

NIRMA LIMITED

BRITANNIA INDS

JYOTHY LABORATORIES

NESTLE INDIA

PERFETTI VAN MELLE

EVEREADY INDS

ITC FOOD

GHARI DETERGENT

HUL FOOD

JOHNSON & JOHNSON

GLAXO SMITHKLINECADBURY INDIA

Total 8.4 Mn DealersDEC10

Dealer% on FMCG -All India (U+R)

DistributionIncreases Rank

3

1

2

Source: Ac Nielsen

FMCG Distribution 2010


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Rural FMCG growth ahead of Urban growth

Good growths in FMCG across states


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Retailers

4.8 million retailers in Rural India

They play a significant role:

Influence leader

Brand promoter

Relationship marketer

Harbinger of change

Money lender

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Haats

Haats periodic markets 42,000

A place for political, social, and cultural contact

Weekly 75%

Bi-weekly 20%

Daily 5%

Average number of visitors4,600

Average sale per dayRs. 2.25 lakhs

Number of stalls/ Haat300+

Villages covered perHaat15 to 20

88% are regular visitors

77% of the participants attend 4 Haats every week

32% own permanent shops in villages

Source: MART study

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Mandis

Mandis agricultural markets set up by state governments to procure

agricultural produce

Total Mandis6,800

Most agricultural areas with population more than 10,000 have Mandis

Average population catered to each Mandi ~1.36 lakhs

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Melas

Melas fairs and festivals

A place for entertainment and shopping

Number ofMelas

500 major ones

25,000 total

Average number of visitors7.5 lakhs

Average number of outlets -850

Average salesRs. 2.5 crores

Melas may be classified as: Religious, cultural or commercial

Local, regional or national

One day, short duration or long duration

Source: MART study

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Challenges in Rural Distribution & Merchandising

Large number of small markets, Dispersed population and trade

Cost of coverage: Viability, Frequency, Logistics, Route plan

Managing wholesale as high wholesale dependence

Poor road connectivity (all weather roads)

Multiple tiers leading to higher cost

Availability of right channel partners

Poor storage system

Credit driven market

Activation challenges: Display in rural shops, communication of others &

schemes, Local offtake driving activation

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Understanding the Characteristics of the Rural Masses

Very intelligent and clever cannot be easily

hoodwinked. Daily activity is reutilized

Plenty of time / No Sundays

Very conscious of value for money

Does not like to pay extra for frills he cannotuse.

E.g. Color TV

High involvement in any product purchased

E.g. Durables

Perceptions, traditions, values vary fromstate to state and in some cases from region

to region within a state.(MRF Bullock Cart

Tyres)

Divisions based on caste, community &other hierarchical factors continue to exist.


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Rural Communication

Television does notdistinguish between urban

and rural

You may be able to getaway with a common TVC

for both urban and rural

audience particularly forFMCG products providedyour communication is not

gimmicky, suggestive and

is easy to comprehend.

But when it comes to Durables,where rational decisions are

involved, it is advisable to targetthe opinion leaders first.

While urban oriented TVC mayregister with opinion leaders and

help create awareness, for realimpact down the line, a region

specific and need specific

communication program has to

be devised which provides for

demonstration and touch & feel of

the products.

Rural Urban Divide in terms of communication continues to exist

Hence need for different communication packages focused on rural audience


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Build word-of-mouth

Importance of opinion leaders

Educated village youth asopinion leaders

Women and children asdemand generators

Customized events targetingspecific groups with focused

communication


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Lessons from the Success of

regional brands in recent times

They understand the regional ethos better

They satisfy a perceived local need

Their communication touches a chord which helps in brand acceptance

They are flexible Adapt to changing market situations

E.g. Anchor, Gadi, Ajanta, Cavinkare (Chik), Power, Goldwinner, Arasan

If you are small with limited budgets start by concentrating on smaller areas Outdoor / local Cable TV / Radio / participate in local festivals etc

Even Nirma started very small - Today it is a Rs.2000 plus crore company!


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4 As (Actions) for Rural

True success will come from inclusive purpose inspired

growth strategy to touch & improve consumer lives in Rural

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Acceptability(CONCEPT)

Affordability(PRICING)

Availability (DISTRIBUTION)

Awareness(COMMUNICATION, ACTIVATION,EXPERIENCE, EDUCATION)

Documents

RURAL MARKET Class Notes.pptx