Selling in Rural India

8/8/2019 Selling in Rural India

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Selling in Rural IndiaThe Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannotafford to ignore.

TO expand the market by tapping the countryside, more and more MNCs are foraying into India's ruralmarkets. Among those that have made some headway are Hindustan Lever, Coca-Cola, LG Electronics,Britannia, Standard Life, Philips, Colgate Palmolive and the foreign-invested telecom companies.

Opportunity

The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannotafford to ignore. With 128 million households, the rural population is nearly three times the urban.

As a result of the growing affluence, fuelled by good monsoons and the increase in agricultural output to200 million tonnes from 176 million tonnes in 1991, rural India has a large consuming class with 41 percent of India's middle-class and 58 per cent of the total disposable income.

The importance of the rural market for some FMCG and durable marketers is underlined by the fact thatthe rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of all two-wheelerpurchased.

The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washingsoap, blades, tea, salt and toothpowder, What is more, the rural market for FMCG products is growingmuch faster than the urban counterpart.

The 4A approach

The rural market may be alluring but it is not without its problems: Low per capita disposable incomesthat is half the urban disposable income; large number of daily wage earners, acute dependence on thevagaries of the monsoon; seasonal consumption linked to harvests and festivals and special occasions;poor roads; power problems; and inaccessibility to conventional advertising media.

However, the rural consumer is not unlike his urban counterpart in many ways.

The more daring MNCs are meeting the consequent challenges of availability, affordability, acceptabilityand awareness (the so-called 4 As)

Availability

The first challenge is to ensure availability of the product or service. India's 627,000 villages are spreadover 3.2 million sq km; 700 million Indians may live in rural areas, finding them is not easy. However,given the poor state of roads, it is an even greater challenge to regularly reach products to the far-flungvillages. Any serious marketer must strive to reach at least 13,113 villages with a population of morethan 5,000. Marketers must trade off the distribution cost with incremental market penetration. Over the

years, India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong distributionsystem which helps its brands reach the interiors of the rural market. To service remote village,stockists use autorickshaws, bullock-carts and even boats in the backwaters of Kerala. Coca-Cola, whichconsiders rural India as a future growth driver, has evolved a hub and spoke distribution model to reachthe villages. To ensure full loads, the company depot supplies, twice a week, large distributors whichwho act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoiningareas. LG Electronics defines all cities and towns other than the seven metros cities as rural and semi-urban market. To tap these unexplored country markets, LG has set up 45 area offices and 59rural/remote area offices.

Affordability

The second challenge is to ensure affordability of the product or service. With low disposable incomes,

products need to be affordable to the rural consumer, most of whom are on daily wages. Somecompanies have addressed the affordability problem by introducing small unit packs. Godrej recentlyintroduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs, priced at Rs 4-5 meant


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specifically for Madhya Pradesh, Bihar and Uttar Pradesh the so-called Bimaru' States.

Hindustan Lever, among the first MNCs to realise the potential of India's rural market, has launched avariant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The move is mainly targeted at therural market. Coca-Cola has addressed the affordability issue by introducing the returnable 200-ml glassbottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from therural markets. Coca-Cola has also introduced Sunfill, a powdered soft-drink concentrate. The instant and

ready-to-mix Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 and mutiserve sachet of200 gm priced at Rs 15.

Acceptability

The third challenge is to gain acceptability for the product or service. Therefore, there is a need to offerproducts that suit the rural market. One company which has reaped rich dividends by doing so is LGElectronics. In 1998, it developed a customised TV for the rural market and christened it Sampoorna. Itwas a runway hit selling 100,000 sets in the very first year. Because of the lack of electricity andrefrigerators in the rural areas, Coca-Cola provides low-cost ice boxes a tin box for new outlets andthermocol box for seasonal outlets.

The insurance companies that have tailor-made products for the rural market have performed well.

HDFC Standard LIFE topped private insurers by selling policies worth Rs 3.5 crore in total premia. Thecompany tied up with non-governmental organisations and offered reasonably-priced policies in thenature of group insurance covers. With large parts of rural India inaccessible to conventional advertisingmedia only 41 per cent rural households have access to TV building awareness is anotherchallenge. Fortunately, however, the rural consumer has the same likes as the urban consumer movies and music and for both the urban and rural consumer, the family is the key unit of identity.However, the rural consumer expressions differ from his urban counterpart. Outing for the former isconfined to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan.Consumption of branded products is treated as a special treat or indulgence.

Hindustan Lever relies heavily on its own company-organised media. These are promotional eventsorganised by stockists. Godrej Consumer Products, which is trying to push its soap brands into theinterior areas, uses radio to reach the local people in their language.

Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of rural households. Itdoubled its spend on advertising on Doordarshan, which alone reached 41 per cent of rural households.It has also used banners, posters and tapped all the local forms of entertainment. Since price is a keyissue in the rural areas, Coca-Cola advertising stressed its `magical' price point of Rs 5 per bottle in allmedia.LG Electronics uses vans and road shows to reach rural customers. The company uses locallanguage advertising. Philips India uses wall writing and radio advertising to drive its growth in ruralareas.

The key dilemma for MNCs eager to tap the large and fast-growing rural market is whether they can doso without hurting the company's profit margins. Mr Carlo Donati, Chairman and Managing-Director,Nestle, while admitting that his company's product portfolio is essentially designed for urban consumers,cautions companies from plunging headlong into the rural market as capturing rural consumers can beexpensive. "Any generalisation" says Mr Donati, "about rural India could be wrong and one should focuson high GDP growth areas, be it urban, semi-urban or rural."

WHAT MAKES RURAL INDIA ATTRACTIVE?It is an upcoming market and the following facts substantiate this-

800 million people

Estimated annual size of the rural market

FMCG Rs 65,000 Crore

Durables Rs 5,000 Crore


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Agri-inputs (incl. tractors) Rs 45,000 Crore

2 / 4 wheeler vehicles Rs 8,000 Crore

In 2001-02, LIC sold 55 % of its policies in rural India.

Of two million BSNL mobile connections, 50% are in small towns/villages.

Of the six lakh villages, 5.22 lakh have a Village Public Telephone (VPT)

41 million Kisan Credit Cards issued (against 22 million credit-plus-debit cards in urban) withcumulative credit of Rs 977 billion resulting in tremendous liquidity.

42 million rural households are availing banking services in comparison to 27 million urbanhouseholds.

Investment in formal savings instruments: 6.6 million households in rural and 6.7 million in urbanIndia.

Nano-Marketing or sachets worked well in rural India and there is ample scope for the products to be

accepted by consumers if the price is competitive.

FMCG COMPANIES IN RURAL MARKETS

INTRODUCTION

Fast Moving Consumer Goods (FMCG), also known as Consumer Packaged Goods (CPG), are products

that have a quick turnover, and relatively low cost. Consumers generally put less thought into the

purchase of FMCG than other products. The absolute profit made on a FMCG product is less; however

they are generally sold in high numbers. Hence profit in FMCG goods generally scales with the number

of goods sold, rather than the profit made per item.

The classification generally includes a wide range of frequently purchased consumer products including:

toiletries, soaps, cosmetics, teeth cleaning products, shaving products, detergents, and other non-

durables such as glassware, bulbs, batteries, paper products and plastic goods. The category may

include pharmaceuticals, consumer electronics and packaged food products and drinks, although these

are often categorized separately.

The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of

US$ 13.1 billion. It has a strong MNC presence and is characterized by a well established distribution

network, intense competition between the organized and unorganized segments and low operationalcost. Availability of key raw materials, cheaper labor costs and presence across the entire value chain

gives India a competitive advantage.

The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. Penetration

level as well as per capita consumption in most product categories like jams, toothpaste, skin care, hair

wash etc in India is low indicating the untapped market potential. Burgeoning Indian population,

particularly the middle class and the rural segments, presents an opportunity to makers of branded

products to convert consumers to branded products.

Growth is also likely to come from consumer 'upgrading' in the matured product categories. With 200

million people expected to shift to processed and packaged food by 2010, India needs around US$ 28

billion of investment in the food-processing industry.

NEED OF FMCG IN RURAL AREAS

After years of growth derived primarily from the urban markets, the FMCG companies have now realized

that India lies in its rural villages. So much so that rural marketing has become the latest marketing

mantra of most FMCG majors. With extensive competition not only from MNCs but also from the


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numerous regional players and the lure of an untapped market has driven the marketers to chalk out

bold new strategies for targeting the rural consumer in a big way. To gauge the extent of shift in focus

of the FMCG giants just sample this: recently Godrej Consumer Products Ltd (GCPL) did something that

it hadn't done before; it introduced smaller pack sizes of some of its soaps and put them on the market

for Rs 5. And FMCG giant HLL has just launched a green variant of Lifebuoy soap, which, it hopes will be

a winner in the rural areas. Also, don't be too surprised if you village folk having their hair washed and

dyed as they are only taking advantage of the live demonstrations conducted by Chennai-basedCavinKare Products. So it is clear that rural markets have caught the eyes of FMCG marketers and it is

being targeted through experiments in a big way.

Over 70% of Indias 1 billion plus population lives in around 627,000 villages in rural areas. This simply

shows the great potentiality rural India has to bring the much-needed volumes and help the FMCG

companies to bank upon the volumedriven growth. Also, the rural market has been growing steadily

over the years and is now bigger than the urban market for FMCGs (53% share of the total market)

with an annual size in value terms currently estimated at around 50,000 crores. It is a definite boon in

disguise for the FMCG majors who have already reached the plateau of their business curve in urban

India and are desperately seeking new ways to increase sales.

To drive home the potential of rural India just consider some of these impressive facts about the rural

sector. As per the National Council for Applied Economic Research (NCAER) study, there are as many

'middle income and above' households in the rural areas as there are in the urban areas. There are

almost twice as many 'lower middle income' households in rural areas as in the urban areas. At the

highest income level there are 2.3 million urban households as against 1.6 million households in rural

areas. According to the NCAER projections, the number of middle and high-income households in rural

India is expected to grow from 80 million to 111 million by 2007. In urban India, the same is expected

to grow from 46 million to 59 million. Thus, the absolute size of rural India is expected to be double that

of urban India. But despite the high rural share in these categories, the rural penetration rates are low,

thus offering tremendous potential for growth.

Thus it becomes amply clear that rural India has to be the hot target in future for FMCG companies as it

presents a plethora of opportunities, all waiting to be harnessed. Many of the FMCG companies are

already busy formulating their rural marketing strategy to tap the potential before competition catches

up. All biggies in the industry be it HLL, Marico, Colgate-Palmolive or Britannia, are showing deep

interest in rural India. However not everything is all rosy and there exist some gray areas in the rural

strategies also.DEVELOPING EFFECTIVE RURAL MARKETING STRATEGY

The winning strategy is to focus on the core competency such as technological expertise to design

specific products for the rural economy. The most remarkable example in this context is the launch of

sachets which has transformed the rural market considerably as packaging in smaller units and lesser-

priced packs increases the products affordability. Also companies like HLL and Nestle who have adopted

this strategy have benefited tremendously. Another case is of Britannia with its Tiger brand of low priced

and conveniently packaged biscuits becoming a great success story in rural markets.

Along with the cultural dynamics, the needs and latent feelings of the rural people have to be well

understood before launching products in rural segments. Marketers would do well to first understand this

and then designing products accordingly. For example, Cadburys has launched ChocoBix, a chocolate

flavored biscuit which is based on the consumer insight that rural mothers opt for biscuits rather than

chocolates for their children.

Another very important factor that needs to be looked at is the proliferation of spurious products. Rural

masses are illiterate people and they identify a product by its packaging (color, visuals, size etc.). So it

becomes very easy for counterfeit products to eat into the market share of established reputed brands.

The retailer also gets a larger profit on selling the counterfeits rather than the genuine products and

hence is biased towards the fakes. Brands such as "Jifeboy", "Bonds Talcum", "Funny & Lovely" etc.,

which are doing the rounds of rural markets, pose considerable challenge to rural marketers.

The rural market remains quite price-sensitive and thus squeezing costs at every stage is of vital

importance. Some FMCG giants like HLL are in process of enhancing their control on the rural supply

chain through a network of rural sub-stockists, who are based in the villages only. Apart from this to

acquire further edge in distribution HLL has started Project Shakti in partnership with Self Help groups of

rural women. A very significant step for change could be an effort to directly tap the haats, mandis,

melas and local bazaars which provide an opportunity of promoting the brand in front of a large

congregation of rural consumers.Finally an effective rural strategy for FMCG companies must include the use of traditional media for


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creating awareness about their products in the rural markets. The traditional media, with its effective

reach, powerful input and personalized communication system will help in realizing the goal. The

advantages of traditional media which make it a powerful marketing communication channel are:

accessibility is high, it involves more then one sense, interest arousal capability is high and minimum

cost. Brooke Bond Lipton India Ltd (BBLIL) markets its rural brands through magic shows and skits.

Barring a few, notable exceptions, rural marketing in India is still about a van campaign, a badly-made

commercial, a few painted walls and the occasional participation in village haats and melas. But then,"rural" means different things to different people: from 500,000 people for consumer durables, to less

than 50,000 for fast-moving consumer goods. Still, it is heartening to note the increasing awareness of

the importance of rural markets - or, at least, of companies wanting to move beyond urban boundaries.

According to estimates by the Rural Marketing Agencies Association of India, the total budget for rural

marketing is only about Rs 500 crore (Rs 5 billion), compared to the over Rs 13,000 crore (Rs 130

billion) allotted to mass media. This is grossly inadequate to cover the huge potential for different

products in rural markets. Of course, clients' reluctance to spend big money for bigger results in rural

markets is because there are no standard performance yardsticks for judging the efficacy of the rural

marketing efforts.

Companies like Cavin Kare (Chik Shampoo, Meera Herbal Powder, Fairever Cream and so on), Anchor

(100 per cent vegetarian toothpaste), Ghadi detergent powder and Power soap are proof that regional

brands can become brands to reckon with. And don't forget Nirma, the most enduring example of a

brand that began as a regional player and is now a giant.

COLGATE PALMOLIVE INDIA LTD.

COLGATE PALMOLIVE - CIBACA TOOTHPASTE

Client: Colgate Palmolive

Product: Toothpaste

Brand: Cibaca

COMMUNICATION STRATEGY

Pitched against low priced products using Colgate lineage and the resultant global quality assurance at

the same price point

A well planned mobile marketing activity, which included interactive product oriented game, anedutainment film using well know TV stars of Karnataka, besides product sampling, sales and placement

Result

Awareness for the brand has increased multifold and is reflected in the spontaneous increase in sales.

TOOTHPASTE MARKET PICKING UP

The company had undertaken a 17% price cut in flagship toothpaste brand Colgate Dental Cream (CDC)

in the first quarter and a substantial price reduction of Colgate Cibaca in the second half. These

reductions affected about 65% of the sales in FY04. Despite the lower value growth due to price

reductions, Colgate has been able to grow volumes in the toothpaste segment in FY04. Toothpaste

volumes grew by 3.5% during the year as against an 8.3% decline in FY03. The growth trend in first five

months of 2004 reveal a robust 7.9% growth in volumes as against a 5.1% decline during the same

period.

Successful launches

The company launched Colgate Herbal White in the toothpaste range and Colgate Motion Kids Indias

first battery powered toothbrush for kids in the Toothbrush category during the year. New launches in

the personal care portfolio include Palmolive Aroma range of Toilet Soap, Liquid Hand Wash, Shower Gel

and Talcum Powder. These have also contributed to the volume growth.

Strategy

Colgate plans to focus on strengthening dominance and reignite growth in core oral care business. The

strategy would be to defend and grow base business and improve share in fast growing LPP segment.

The company plans to build preference for Colgate Cibaca by leveraging on Colgate equity and

matching prices of competitors to aggressively to counter LPP threat. The company plans expand market

by using local press to communicate value and through micro targeting within key LPP states.

Over the long term, Colgate plans build a strong presence in emerging PCP (Personal Care Products)

liquids categories. While this is small segment, the company expects the category to grow sharply over

the next 5-10 years and it would emerge as an important business in future. Personal products currentlyaccount for 7% of revenues.


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MARKETING MIX FOR COLGATE PALMOLIVE INDIA LTD

Colgate Palmolive is the market leader in the Indian oral care market, with a 51% market share in the

toothpaste segment, 48% market share in the toothpowder market and a 30% share in the toothbrush

market. Presently it is facing competition from no. 2 player HLL and more recently from small local

players (Meswak, Babool, Anchor ) and other MNC's such as Smithkline (Acquafresh ). The future

strategy of the company in Oral Hygiene Products for 2006-07 on the basis of 4 P's would be:

1. Products:Colgate-Palmolive will provide the public with safe and effective products and will strive to produce

products that have the lowest practical impact on the environment. CP would come up with another

strong brand name other than Colgate and Cibaca. CP should also try to position some innovative

toothpaste with a brand name other than Colgate but under the umbrella of Colgate Palmolive. In

toothpowder, it would endorse the development of Colgate Ayurvedic Toothpowder' focused toward

rural rich and consuming class. They should come up sachets of these tooth powder and position toward

rural population who buy in smaller lots. For Urban rich and consuming class, CP would come up with

the products on the basis of functional benefits. E.g. CP would expand Colgate Herbal brand to herbal

clove flavor, herbal lime and mint flavor etc. For toothbrush, CP woulc concentrate on functional benefits

and would launch different toothbrushes for different age groups. I would also launch a special

toothpaste and toothbrush for kids in the age group from 4-10 years.

2. Packaging:

To reduce the impact of our product packaging on the environment, we will work to improve the

environmental compatibility of all our packaging materials. Colgate endorses the worldwide hierarchy of

solid waste management : source reduction; recycling (including reuse); incineration; and land filling.

3. Price:

The price would largely be based on the competitor's price. From the niche products e.g. Colgate herbal,

Colgate Blue etc, I would charge higher premium than the generic dental white crme that would be

focused on consuming and lower income classes. The pricing would be done on the basis of price points

and the packaging would be customized on the basis of price points.

4. Promotion:

CP would be positioning Colgate dental white crme and toothpowder towards rural rich segment. For

rural consuming class CP would be endorsing Cibaca toothpaste. Most of the promotional expenses

would be T.V. media as it would have better reach to both urban and rural population by 2006-07. Apart

from T.V., FM radio for urban population and MW and SW radio would also be used for promotiontowards rural population. For urban population hoarding on national highways outside the metros would

provide better eye catch.

5. Place:

CP would try to increase product penetration to rural population as by 2006-07 the rural population who

is rich and consuming class would be 209Mn which is not much lesser than urban rich and consuming

population of 253Mn people. CP would try to increase the wholesalers to smaller towns and would track

the distribution path so that they are covering all the village areas around the towns.

6. Facilities:

Colgate-Palmolive is committed to the health and safety of our employees and the communities in which

we operate, as well as the protection of the environment. We will establish and maintain programs for

the operation and design of our facilities that meet or exceed applicable environmental, health and

safety laws and regulations.

7. Business:

Colgate-Palmolive will consider environmental, health and safety issues in all significant business

transactions, including acquisitions, divestitures, discontinuance of operations, and entry into joint

ventures. We will also act in a responsible manner with respect to the environmental protection of the

lands under our management and ownership.

COLGATE'S BRIGHT SMILES, BRIGHT FUTURES

The Colgate Bright Smiles, Bright Futures Oral Health Educational Program worldwide was developed to

teach children positive oral health habits of basic hygiene, diet and physical activity. This Program also

encourages dental professionals, public health officials, civic leaders and most importantly, parents and

educators to come together to emphasize the importance of oral health as part of a child's overall

physical and emotional development.

Under this Program conducted by Colgate-Palmolive, India children in primary schools receive

instructions in dental care from members of the dental profession nominated by the Indian DentalAssociation. Education is imparted with the aid of audio-visuals and printed literature created by the


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company. Free dental health care packs, including samples, are also distributed by the company to

encourage the practice of oral hygiene.

Teachers Training Program is an integral part of the School Dental Health Program, conducted regularly

across the country to promote preventive dental health care.Colgate also has launched its first-ever

online school curriculum featuring fun and entertaining activities.

The Colgate top management met up with the Analyst community in Mumbai yesterday to discuss FY03

results. Managing Director Graeme Dalziel made a detailed presentation on the oral care category,Colgates performance and companys strategy for the business.

SLOWDOWN IN INDUSTRY

The oral care market degrew by 9% in 2002-03 in value terms. The urban toothpaste market witnessed

a 3.8% decline, while the rural market degrew by 6.2%. An analysis of the degrowth trend revealed that

almost 69% of the drop in urban consumption was due to decline in consumption of toothpaste, while

31% was attributed to partial shift of consumers from toothpaste to toothpowder. In the rural markets,

67% of the decline was attributed to drop in consumption. 6% of decline was due to partial shift to tooth

powder, while almost 18% of decline was due to total shift to Toothpowder. Over 9% of decline in

volumes was attributed to consumers exiting from the category itself and moving back to traditional

dentrifices.

COLGATE IMPROVES MARKET SHARE

Despite the slow down Colgate has managed to improve market share in all the three categories viz.

Toothpaste (+1.2%), Toothpowder (+1.1%) and Toothbrush. (+0.4%)

CHANGE IN MARKETING STRATEGY

Colgate has taken an average price cut of 17% on its toothpaste brand portfolio, in a bid to spur volume

growth in the category. This is a major strategy change as compared to the promotion driven marketing

being undertaken previously, which failed to generate the anticipated growth. Although adspend in

absolute terms has been lowered by 20% at Rs1.85bn, Colgate has managed to up its share of voice in

the toothpaste category from 43.1% in FY03 to 51.3% in FY03, reflecting that category ad spend have

gone down significantly.

HLL'S NIHAR COCONUT OIL

INTRODUCTION

The hair oil market is huge, valued at Rs 6 bn. Due to the varied consumption habits of consumersacross the country, where coconut oil and edible oil are interchangeably used, the size of the market is

likely to be higher than estimated. More importantly, the market is growing at an impressive 6-7% in

volume terms despite the high penetration level.

Usage of hair oil is a typical Indian traditional habit. It is perceived to offer benefits of nourishment, hair

strengthening, faster and better growth, and reduce the problem of falling hair. Hair oil is a very Indian

phenomenon. It is used as a conditioner and nourisher. There are two types hair oil available in the

market; coconut oil and non-greasy perfumed oil. Coconut oil comprises 2/3 rd of the total market and

the balance comprises the non-greasy perfumed oil.

Usage of hair oil is an everyday habit with 50% of the population out of which some perceive that

massaging the head with hair oil has a cooling impact. The penetration of hair oil is fairly high at around

87% and evenly distributed among the urban and rural areas. The major positioning platforms for hair

oil are purity, hair nourishing and more recently, non-greasy look. Coconut oil and perfumed oil accounts

for about 65% and 35% of market in volume terms.

Unlike shampoos or hair colors, which are products relatively new to the Indian psyche, the usage of

hair oil is a deeply ingrained habit with Indian consumers. Therefore, this is one product where the

major players do not have to fight either monetary or psychological barriers to usage. But this does not

necessarily mean that being a branded player in the Rs 1,300-crore hair oils market is easy.

Branded players account for just over a third of the total hair oil market. Players in the plain coconut oil

segment operate in a category where there are few entry barriers in place. Loose oils are priced on the

basis of input costs and availability, both of which are notoriously volatile. Since branded players have to

grow at the expense of the ubiquitous unorganised segment and a host of regional and local brands, it is

difficult to shield margins and selling prices from the vagaries of loose oil prices.

KEY OBJECTIVE

The main objective of Nihar coconut oil is to overtake the loose oil consumers in rural areas. It also aims

at being the market leader in rural market by overcoming other brands.It is a quiet conquest by Hindustan Lever Ltd (HLL) in the rural coconut oil market. HLL's Nihar coconut


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oil achieved a market leadership in the rural coconut oil market in October 2000, by displacing all-time

leader Parachute of Marico Industries.

As per market research firm ORG-Marg's retail audit for the rural coconut oil market, Nihar's market

share stood at 25.4 per cent in volumes in October, while that of Parachute was at 23.6 per cent. The

total volume of the rural coconut oil market is around 54,000 tonne, growing at 6-7 per cent annually.

Even as HLL has managed to scrape through the leadership position of the rural coconut oil market, it is

still far from being crowned the all-India leader in coconut oils.NIHAR DISPLACES PARACHUTE IN RURAL COCONUT OIL MARKET

It is a quiet conquest by Hindustan Lever Ltd (HLL) in the rural coconut oil market. HLL's Nihar coconut

oil achieved a market leadership in the rural coconut oil market in October 2000, by displacing all-time

leader Parachute of Marico Industries.

As per market research firm ORG-Marg's retail audit for the rural coconut oil market, Nihar's market

share stood at 25.4 per cent in volumes in October, while that of Parachute was at 23.6 per cent. The

total volume of the rural coconut oil market is around 54,000 tonne, growing at 6-7 per cent annually.

Coconut oil is a relatively new area for the multinational, and HLL unleashed significant aggression in

this market in the last two-three years.

The multinational's strategy is simple: to upgrade loose oil consumers by offering low-unit price packs.

The Nihar low-price pouches launched early this year seem to have performed the trick. Pricing is a

critical issue in the branded coconut hair oil market where the consumption of low-priced loose oils is

huge. So as to tackle the pricing issue, HLL launched Nihar and Cococare in various price points in

pouches, such as Rs 5.50 for 50 ml, Rs 10 for 100 ml and Rs 20 for 200 ml.

HLL believes that low-unit price packs will lead to substantial conversions of the loose oil consumers to

packaged and branded oils. This, the multinational feels, would also enable the company to gain a

higher share of the market. Rural and urban markets contribute equally to the overall Rs 500 crore

coconut oil market. HLL's portfolio of brands in this sector comprise Nihar and Cococare.

These together command a market share of about 20 per cent share of all-India coconut oil market.

Marico's flagship brand Parachute is the all-India market leader with a share of about 53 per cent. Thus,

even as HLL has managed to scrape through the leadership position of the rural coconut oil market, it is

still far from being crowned the all-India leader in coconut oils. Nihar's all-India share at the end of

1999, stood at 12 per cent, as per ORG-Marg retail audit for the rural plus urban market.

The brand's share in the beginning of 1999 stood at 9.5 per cent. However, since this gain in share has

not really impacted Parachute's all-India market share, the share has been garnered through conversionof loose oil consumers.

VALUE-ADDED HAIR OILS

Given the limited differentiation possibilities in the coconut oil segment, major players in the branded

hair oils market have been training their sights on value-added hair oils. This has spawned a range of

product innovations -- hair oils with herbal ingredients, non-sticky oils, light hair oils, and lately,

dandruff solution hair oil.

An entry into the value-added hair oils segment appears to offer quite a few benefits to the branded

players. One, with easier differentiation from the regional and local brands, establishing a brand identity

is easier. Two, this makes value-added hair oils less vulnerable to price competition from cheaper

alternatives. Third, value addition helps players command a price premium over the no-frills coconut oil

brands.

Both herbal oils and non-sticky hair oils have been quite successful as product concepts. Dabur India's

Vatika hair oil, one of the first players to milk the herbal category through aggressive advertising,

registered a growth rate of 74 per cent in 1998-99. Dabur's hair oils business continued to grow at

around 18 per cent in 1999-2000. HLL's Clinic Plus non-sticky hair oil (which combines coconut oil and

mineral oil) has also been an unqualified success. While Parachute continued to remain the lynchpin of

Marico's hair care business, it was the value-added hair oils, such as Hair and Care, which clocked higher

growth rates of late. While Parachute's growth rate fell from 14 to 6 percent in the first half of 2000-01,

Hair and Care's growth rates improved from around 7 per cent to 23 per cent in the same period. HLL's

Clinic All Clear hair oil and Parachute Dandruff Solution has also entered the fray.

Nihar Perfumed Coconut Oil continued to grow well, while Clinic All Clear Dandruff Oil registered

substantial growth of more than 50 %. Nihar Amla Oil was also launched around the end of the year, to

exploit opportunities in this segment of hair oil.

NIHARS MARKET SHARE

For Nihar coconut oil, the company has already established rural leadership. According to ORG-Margfigures for market share in rural areas for 0ct 2000, Nihar is at 25 per cent as compared to Parachute at


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24 per cent. In December 99, Parachute was at 28 per cent as against Nihar at 15 per cent. To increase

urban penetration, the company is changing the imagery of the product by changing the product

packaging. The 200 ml bottle is much sleeker and contemporary.

MARKETING MIX FOR NIHAR COCONUT OIL

1. Product: Packaging innovations

Nihar, India's only double filtered coconut oil has made a change in packaging and logo, which is

innovative, convenient and vibrant. The logo lettering is now in a fresh green color and sports a leafover the brand name. Nihar has consistently been bringing innovations to its consumers, it was the first

to introduce the wide mouth jar and pouches packaging.

In keeping with Nihar heritage, the new packaging is part of Nihars constant endeavors on improvising

and providing quality to our consumers. The tamper proof jar has been introduced with grooves on the

side for a firmer grip giving the jar a more feminine aspect. The flip top tin has been designed for

convinience in pouring out the oil; the wide mouth jar can be used in different climatic conditions. The

essence of the new packaging is to bring about practicality in daily usage of the Nihar coconut oil.

The range of double filtered Nihar coconut oil includes:

Flip top tin, available in 200 ml and 500 ml

Tamper proof cap, available in 100ml, 200ml, & 500 ml with grooves on the side for an easy hold

when oily.

Wide mouth jar available in 200 ml and 500 ml

Pouches available in 50 ml, 100ml and 200 ml

2. Process of preparing the Double filtered Nihar coconut oil

The double Filtration process involves the production of filtered coconut oil from copra. This is done by

downsizing the copra, which is then passed through a cooker and steam heated for facilitating oil

release. The copra is then crushed at a higher pressure. The final step in this stage involves sieving the

oil and parts of the crushed copra through a screen. This still murky oil is allowed to partially settle in

flat-bottomed collection tanks. In the second stage the filtered coconut oil is mixed with special quality

silica and recirculated, this continues until the required clarity is achieved. This filtered oil with adequate

purity finally goes to the packaging line.

Nihar has also migrated to low unit packs to rope in new users. HLL has launched 100 ml pouches of

Nihar priced at less than Rs 10. Apart from making the product more affordable to mass market

consumers, the 100 ml pouches are cheaper on a per ml basis than the larger bottles and flip top packs.

This is likely to bring in new users from the loose oil segment.3. Pricing

To tackle the pricing issue, HLL has launched Nihar and Cococare in various price points in pouches,

such as Rs 5.50 for 50 ml, Rs 10 for 100 ml and Rs 20 for 200 ml. HLL believes that the low-unit price

packs will result in upgradation of the loose oil consumer to this brand, and enable the company to gain

a higher share of the market.

For example, Nihar's small packs in AP has led to the brand's market share gain in this state from a

marginal 2% in April to 35 %.This example is being replicated by the company in each of the states

where Nihar and Cococare draw large consumption. The company feels there is enough room for brands

to gain share by upgrading loose oils users.

The price of copra, the key input in coconut based hair oils, has been a key factor determining the

fortunes of the major players in this segment. The continuation of the present price trends in copra

would probably determine the near term financial performance of the large players in the plain hair oils

business. On this count, there appears to be no near term cause for worry. A large part of the decline in

copra prices is due to the substitution of copra by cheaper imported palmolein.

4. Place ( Distribution)

HLL has a very good distribution network. Hindustan Lever has leveraged the micro-credit model to

expand its rural market from its present 40 per cent penetration. Leveraging the micro-credit model to

expand its rural market, it is piloting `Project Shakti' -- its five-month-old marketing initiative involving

women belonging to micro-credit self-help groups (SHGs) in the Nalgonda district of Andhra Pradesh.

The project, with an obvious `win-win' partnership potential, involves women from SHGs turning into

direct-to-home distributors for HLL in their area, thus helping the company expand its rural market from

its existing 40 per cent penetration in villages with population of over 2000. For the women, it means

income generation without the headache of starting their own venture and becoming vegetable vendors,

fish vendors, pan shop owners, etc., which has generally been the micro-credit model to date.

Andhra Pradesh was obviously chosen for the pilot project as 20 per cent of its rural population iscovered by the micro-credit model. The micro-credit concept, that impacts 45 lakhs women belonging to


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3.33 SHGs in the State, creates wealth for the members of the groups and helps them better their lives

and alleviate poverty. The micro-finance collected in the State, through savings as well as institutional

loans, is around a whopping Rs 800 crore.

For the project, 50 SHGs closest to the highway in Nalgonda district were identified. These are covered

by three Mutually-Aided Credit Thrift Societies (MACTS), which act as semi-distributors in the project.

MACTS, which generally consist of 14 to 15 SHGs, are federated into a co-operative and work in close

tandem with the SHGs. In fact, the project has had several interesting spin-offs. One of the MACTsdistributing HLL products has started its own supermarket, while another is shortly purchasing a vehicle

for its distribution network.

The investment opportunity is relatively risk-free and high on return. HLL is committed to providing the

necessary training inputs to these groups on the basics of enterprise management which the groups can

then use to enlarge their initiatives.

5. Promotion

Nihar attracts a large consumer preference in Bihar, Uttar Pradesh, Madhya Pradesh, Rajasthan, Andhra

Pradesh and Bengal. Promotional activities are region-specific and locally flavored to suit the brand's

requirement in its area of strength.

The customers in the rural area are very price sensitive. Great emphasis is laid on the price factor and

so they advertise keeping in mind the price. A lot of emphasis is given on the price and they also

compare the product with the local brands and how it is superior in quality from the other available local

brands.

Nihar does advertise in the rural area but they dont use much of newspaper as there is a very high level

of illiteracy in the rural area. They do use advertising through T.V. Nihar's "kudrat ki shakti" ad clicked in

the market place as it was distinctly different to the usual hair oil ads, HLL feels. But that is also not on

a large scale as the T.V hasnt yet reached the interiors of rural areas.

PROBLEMS FACED BY NIHAR

Strong competition from other players in the market, especially Parachute of Marico industries.

Pricing is a critical issue in the branded coconut hair oil market where the consumption of low-priced

loose oils is huge.

STRENGTH OF NIHAR

Nihar can gain market share from conversion of loose oil consumers. The strategy is to upgrade the

loose oil use to Cococare/Nihar by offering small pack forms, which are affordable. Nihar has a very strong distribution network, so it can reach more rural areas with its help and cover

the market.

CONCLUSION

In a very short period of time Nihar has been successful in gaining control over the urban market as well

as the rural market. With the help of its strong distribution and its continuous innovations to match the

consumers choice it can continue to maintain its leadership in rural market.

CHENNAI-BASED CHOLAYIL GROUP

THE MEDIMIX SOAP

INTRODUCTION

Medimix has a large user base among the SEC B and C segments and in rural areas in the 30-plus age

group. They are trying to widen its usage by bringing the SEC A segment into their fold. They want to

make it a mass, urban and young brand. This is because it has takers among older consumers who have

seen through the myth of instant and cosmetic results. They know the long-term benefits of Ayurveda.

But this needs to be communicated to a younger audience and they have succeeded in doing that with

the recent campaigns.

The company's aggressive communication strategy has been one of the key factors behind the growth.

Communication has really made the company grow to what it is today. It had a good product, but they

managed to spread awareness and widen its use in the early nineties when the cable and satellite

television arena opened up. Though they were small then, they used to spend nearly 25 per cent of the

turnover on communication and marketing. Now this has settled to around 15 per cent. But it wouldcontinue to follow a communication-led strategy. They have been very meticulous in their approach and


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they research all their ads by getting their agencies to test them on various focus groups before

launching them.

When VS Pradeep took over the reins of this company in 1983, it had a turnover of less than Rs 1 crore.

Today it stands at Rs 200 crore. It was then a single product company with one brand, Medimix. Today

it has 12 brands in their portfolio. It was only a south-based company; today it is a national entity. Six

years ago they headed west by tapping Maharashtra and two years ago they went completely national.

Today they have 1,200 distributors across the country. In fact, their penetration in the south is as highas 80 per cent. In Tamil Nadu alone, in terms of penetration alone, Medimix is second only to Hindustan

Lever's Hamam.

Coca-Cola is using their distribution network to distribute its soft drink concentrate brand Sunfill in the

south. That is because its own network reaches only those places where soft drinks are retailed and not

to those small kirana stores in the interiors where they reach.

All other players are talking of a complete health platform today; they have always talked about holistic

healthcare. They widened our user base through our communication strategy. They started off by telling

users of solutions to their specific problems. For instance, they started off by talking about how the soap

tackled the problem of prickly heat in summer as well as pimples and dandruff. Thus, they concentrated

on each problem separately and communicated the benefits of the soap.

Thereafter, they widened the strategy by placing the soap on a value-for-money platform and said that

this soap was a one-stop-cure for a range of health-related problems. Now, they have further broadened

this plank to include the whole family and they are saying the soap offers total health protection and

addresses each of your individual needs.

Their financial targets would be to build their organisation to a Rs 1,000-crore entity in the next five

years. This will be done by growing in the categories they are present in and eventually by getting into

new areas of growth.

THE RIGHT MIX

MEDIMIX AYURVEDIC SOAP FROM THE CHENNAI-BASED CHOLAYIL GROUP, BUILDS ITS SUCCESS ON A

MEDICAL PLATFORM

Soap maker Medimix, from the Chennai-based Cholayil group, is the maverick marketer that got its

product and marketing mix just right. The company's success is reminiscent of Nirma's in the west. Its

revenue rose metroically from Rs. 50 crore four years ago to Rs. 200 crore last year (2001) on sales of

its ayurvedic soap. Besides, it got an ORG rating of number nine, among soap categories on a national

basis with minimal high decibel advertising, no sexy packaging, no glamorous film star endorsementsand no compromise on its shape, perfume or colour in order to bag bulk orders from hotels.

Six plants of the Cholayil group make 1.5 crore cakes of soap, each weighing 75 gm and 30 lakh cakes

of the 125 gm variety. The soaps are made manually, without the use of power and even the cutting of

the bars into cakes is done by hand-operated hydraulic cutters. However, the company plants to set up

a state-of-the-art unit in Goa. "Once production starts there we will make 1,000 cases per month and

establish a supply beachhead to serve the northern market," says K.H.S. Manian, Vice-President, sales

at the company.

The story of Medimix is the evolution of a home-grown product... from idea to research to manufacture,

packaging, distribution and marketing, all done by a family proprietary concern. Most important, the

company has managed to developed a brand on its own terms. It all started with Dr. V.P.S. Sidhan (who

traces his bloodline to the Cholayil Tarawad of Kerala, a family lineage of ayurvedic vaidyans, followers

of saint Narayana Guru), who served as assistant medical officer with the Southern Railways. Sidhan

had trained for his DMS at the Kilpauk Medical College and so ayurveda took a back-seat until his

retirement. His medical experience showed that chronic ailments, especially skin conditions, defied

allopathic remedies and post retirement, he focused on finding cures through ayurveda. His work with

Viparthy Oil (extract of wild ginger) and its efficacy in treating skin diseases yielded promising results.

Now all he needed was a better vehicle to overcome the oil mess as an applicator.

So, Medimix soap was born. Sidhan's soap was made with 18 herbs in a coconut oil base in the backyard

of his Chennai Cuoolamedu house. The firm was incorproated in the name of Sidhan's wife

Sowbhagyam. She also doubled up as chief manufacture! In 1969, Sidhan launched the Medimix brand

as a total ayurvedic skin-care soap with just Rs. 500 as seed capital and lots of goodwill from the

medical fraternity and chemists network. Sidhan's soap and its efficacy spread through actual-user

endorsements. "We priced it at 85 paise at the time and today it sells for Rs. 9.50," says Manian. There

are five plants, one in Pondicherry, two in Chennai, one in Tada in Andhra Pradesh, one in Bangalore and

one in Viilupuram, to cater exclusively to hotel bulk orders."According to the July-September 2001 ORG figures of volume in tonnes of the top 25 brands of soap on


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a national basis. Medimix at 2625.3 tonnes is way above Mysore Sandal, Margo, Nirma, Jai, Cinthol

Fresh, Pears, Lux International skin care, Liril and Dettol. In the south zone alone it is the sixth-highest

seller with 1,873 tonnes.

What is the strategy that worked for Medimix in a bubble-filled soap arena in which multinational

companies such as Hindustan Lever Limited tower above the rest of the market? Manian unabashedly

says that his group had to run all existing and considered marketing wisdom on its head. "While FMCG

(fast moving consumer goods) products usually take off in the urban centres, and then spread throughthe hub format, Medimix was pitched in the villages first," says Manian. "We targeted the village

kirarmiuala, our best friend and local influencer of decisions so far as buying habits go. He accepted the

merits of Medimix as an ayurvedic product. When he was convinced, his customers got convinced. The

only alternative was Chandrika soap, which had adopted a direct marketing approach. We used to attend

numerous village melas and talk to the people. We went all over India only two years ago. Today, of the

three lakh tonnes of soap sold, ayurvedic soap comprises 7 percent, of which we have 3 per cent."

Medicated soap that is 100 per cent handmade is exempt from tax and rural consumers seem to be

attracted to the medical qualities of the soap far more than they are to the same qualities in a cosmetic,

according to Manian. He says that when a villager visits a city he asks for Medimix soap by name. No

offers, no schemes, no inducements. As Chandrika soap was following the monopoly of direct

distribution. Medimix decided to woo the stockiest and distributors and claims there are 25-year-old

loyalties here. "From 1969 to 1990 growth was slow," says Manian. 'But when S. Pradeep joined the

company as managing director the firm took off in just four years."

It is Pradeep's idea to target hotels. A firm decisions were taken that Medimix would aggressively

market to over 3,000 small hotels all over India, even in small towns. Pradeep says he was pleasantly

surprised to find that even foreign tourists to places such as Pondicherry were impressed by the

medicated quality of Medimix. "We decided that we would not compromise on the packaging or

appearance or the perfume or colour of the soap to gain entry into five-star hotels. Hotels will never buy

at the maximum retail price (MRP), so we supply at cost. What's more, we even manage the inventory

for them."

While Medimix has done well, the company's brand extension, Vrinda Tulisi Soap failed and is being

relaunched with a changed perfume and translucent appearance. Meanwhile, Manian is focusing on the

Indian community in the Middle East, where he believes Medimix can command loyal customers. The

product is exported to Brazil and Italy, as well. "Even in the Indian market, there is a 50 per cent

untapped potential," he says. "We have plans for sandal soap, Viha, and a herbal Ziva shave cream.People are turning to ayurveda in a big way.

"We have the research and knowledge capabilities to turn out more ayurvedic products and build on our

current marketing strength. In the past five years our adspend has grown to Rs.30 crore. We conducted

an ayurveda Congress in Hyderabad and got an impressive response."

Medimix has proved that it is not always glitz and glamour that sells products... a back-to-your-roots

plank that espouses natural products appeals to the average Indian.

NIRMA

MODEST BEGINNING

A brand that was to become a model for other budding entrepreneur had very humble beginnings. At the

fag end of the sixties, Karsanbhai Patel, a 25-year-old chemist manufactured detergents at his home in

Ahmedabad. The detergent named Nirma, after his daughter Nirupama, was cycled to retail outlets.

Since its very inception, Karsanbhai had his finger on the pulse of the people as he realized the need for

a cheaper detergent. Hence, he sold the detergent for Rs. 6, one-fourth of the price of similar products

then available.

THE 4PS OF MARKETING

During that period the detergent powder category belonged almost entirely to Unilever's Surf. Launched

in 1959, Surf grew in the market and became the benchmark in the eyes of both the housewife and

competition (which was then limited to three wholly Indian manufacturers Godrej, Tata and Swastik).

Common opinion prevailed that a quality detergent, had to be a blue powder packed in a colourful

carton. But Nirma was launched as a white coloured product, packed in pouches sealed at the top, with

no colour or design sophistication on the pack.

1. Packaging:The attractive feature was to be the price-around 35% of Surf!


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2. Price:

Soon the brand began to sell like hotcakes and Nirma's market share grew from 0% in 1976 to 61.6% in

1987. It soon pushed HLL over the top. Nirma also dared to break the "rule" that a packaged, especially

advertised brand needed the paraphernalia of branch offices, area managers, and sales representatives

in order carry it through a wide and complicated network. Instead, Nirma went in for what the West

would have called a 'no-frills', approach not just in the product formulation and cost elements, but also

in the all-important sales, distribution and organisational arrangements.3. Planning:

With one of the most comprehensive and widespread distribution network, Nirma reached into the very

heart of India. In the process, it pioneered rural marketing in India-another reason for its astounding

success. In the early 1980's despite the fact that 70% of India's 750 million lived in rural areas, big

MNC's avoided them for the simple reason that it was difficult to penetrate. Nirma's success in rural

India also dispelled the myth that rural consumers are poor and do not have the disposable income to

buy consumer goods. Nirma's policy of manufacturing a low cost "value for money" product was also

aided by the fact that Nirma operated in the small-scale sector. This helped it save an enormous amount

of excise duty that multinationals had to pay on every kilo of detergent produced. This prevented MNCs

from pulling down prices to a level attractive enough for the middle and lower-middle classes, the bulk

segments for Nirma sales. Understanding the economics and rules of the rural game, Nirma identified

that expensive advertising had no place in a market where the buyer was too price-sensitive.

4. Promotion:

Nirma used radio, posters, banners and mobile vans among others as better media options. It was also

one of the first major advertisers on the National Network, a fact borne by its jingle (Nirma Detergent

tikia, iske jhaag ne jaadu kar diya), which still generates instant recall. When you hear the all too-

familiar tune Washing Powder Nirma, you instantly know what it is talking about. The title 'Nirma Girl'

going round and round on her feet and her white dress rising fluff too made for a strong mnemonic for

the brand. This stood up to Surf's Lalitaji's "samajhdari."

SETTING THE PACE

By the early 1980s the burgeoning sales of Nirma reached a rate of growth that was nearly thrice the

industry average. In the past few years while the industry had been growing at the rate of 15 per cent

annually, Nirma's growth had been at least 30-35 per cent. In a swift, single move, Nirma shattered the

myth of "economy at the cost of quality."

SUCCESSFULLY DIVERSIFYING INTO PREMIUM BRANDSOnce it had positioned itself as the largest selling detergent, Nirma moved on to becoming an FMCG. As

the first step it changed to a soaps & detergent company. They said that Nirma would stay successful

only as long as it remained within the confines of economy priced detergents. But that was not to be.

Nirma's foray into the premium brand segment, in cakes and detergents turned out to be a repeat

success story. Nirma is today ranked among India's top 20 .most distributed brands. It has built up a

30% market share in the premium detergent segment and also achieved greater than 20% share, in

less than two years, in the premium soaps market.

Today Nirma has diversified into personal care market with Shikakai, Beauty Shampoo, toothpaste and

has also launched the Nirma brand of iodised salt.

NIRMA-PROFITS AND POSITION (AT HOME AND ABROAD)

Nirma's products over 800,000 tonnes of detergent and over 80,000 tonnes of toilet soaps annually are

consumed by over 250 million customers, through a wide network of 400 distributors and about a million

retail outlets.

It ranks No.2 in toilet soaps; but mainly, in just seven years of marketing soaps, Nirma sold more

volumes than the others had in 25 years!

In international markets too, such as Bangladesh, Nirma has left behind both, Unilever and P & G and

now plans to export detergents to Russia and the Middle East.

MOVING FORWARD THROUGH BACKWARD INTEGRATION

By manufacturing their own raw material, in the form of Linear Akyl Benzene (LAB) and Soda ash, Nirma

offers more value to its buyers. The Rs. 4.5 billion LAB manufacturing plant at Savli (the most modern in

India and the second best in the world), was set up in minimum time and cost once again showing

astute management skills. It also has the largest soap manufacturing facility in the country, under a

single roof. A state-of-the-art packaging plant (another first in Gujarat) catering to a staggering 1.2

million polythene bags and 6 million wrappers, daily!

ECO-FREINDLY AND ENVIRONMENTALLY SAFEAt the very outset, Nirma was a phosphate-free detergent, making it eco-friendly. A detergent by-


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product, Spent acid, is not released into the environment, but used as raw material in the SSP fertiliser

unit. At the Mandali complex, alone, 1,00,000 trees can be found on a 125 acre campus.

NIRMA - SWOT ANALYSIS

Strengths:

Strong Brand equity. Nirma is a Rs. 17 billion-umbrella brand offering consumers a broad portfolio of

products at multiple price points in the Detergents, Soaps & Personal Care market.

Produces a range of industrial chemical products which primarily serve as raw material or intermediatesfor Soaps and Detergents business.

Market leadership in detergents and fabric wash and second largest player in toilet soaps.

Wide distribution network.

Weakness:

High interest burden.

Less presence in premium segment.

Lacks global tie-ups and thus finding it hard to tap export markets.

Opportunities:

Exports

Acquisitions for strengthening its distribution tie-ups.

Entry into other categories like shampoos, toothpastes and fabric whiteners.

Threats:

MNCs coming, to India particularly in Toilet and Soap industry. Emergence of small but strong regional

players.

Nirma as a brand has been able to etch a niche for itself in the face of intense MNC competition. It has

not only emerged victorious in its core competency, detergents, but has also successfully moved on into

newer products. Nirma's achievement is surely something about which an Indian can be proud of, a

brand that has lived up to its catch line; Better Products, Better Value, Better Living!

THE MAN BEHIND THE BRAND

A man of exemplary vision and extraordinary courage, Mr. K. K. Patel had his finger on the proverbial

pulse of the rural India, from the very beginning. He is the stuff that legends are made of. The Wall

Street Journal, The Economist, Discover India and the Economic Review have all featured him at some

time or the other. A marketing wizard, humanitarian and entrepreneur par excellence, his marketing

expertise forms the basis for case studies at Business Schools.

Mr. K.K. Patel firmly believes that a person who has received a lot out of life needs to give somethingback. One among the many contributions has been the Nirma Memorial Trust that takes care of deprived

women in Gujarat. The Nirma Foundation, set up in 1979, has donated millions, within the state &

outside, for schools, colleges, temples and social institutions.

The best reward of all for Mr. K.K. Patel, as he often says continues to be "the smile on the face of a

satisfied buyer." He built the brand, Nirma, from scratch, took it from strength to strength and, in the

process, pioneered rural marketing in India. The result being one of the most comprehensive and

widespread distribution networks in the country. Housewives swear by it, retailers stock it, unfailingly,

and brand loyalty continues to increase.

Nirma has arrived and has truly become a household name, in every sense of the term.

Commenting on his success the in September 10, 1988. The Economist wrote: "Rarely does a small

manufacturer in a developing country take on a big multinational and win. Mr. K.K. Patel has done it in

India, taking three-quarters of Hindustan Lever's potential market from it."

BRITANNIA INDIA LTD (BIL)

INTRODUCTION

Britannia India Ltd was incorporated in 1918 as Britannia Biscuit Company Ltd and currently the Groupe

Danone (GD) of France (a global major in the food processing business) and the Nusli Wadia Group hold

a 45.3 per cent equity stake in BIL through AIBH Ltd (a 50:50 joint venture). BIL is a dominant player in

the Indian biscuit industry, with major brands such as Tiger glucose, Mariegold, Fifty-Fifty, Good Day,

Pure Magic, Bourbon etc.

The company holds a 40 per cent market share in the overall organised biscuit market and has a

capacity of 300,000 tonne per annum. Currently, the bakery product business accounts for 99.1 per cent

of BIL's turnover. The company reported net sales of US$ 280 million in 2002-03. Britannia IndustriesLtd (BIL) plans to increase its manufacturing capacity through outsourced contract manufacturing and a


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greenfield plant in Uttaranchal to expand its share in the domestic biscuit and confectionery market.

Britannia Industries Limited (BIL) has emerged as one of the largest food companies in India by 1999.

According to a survey conducted by ORG-MARG and A&M, Britannia was the fifth most popular brand in

India in 1997 and was the only brand belonging to the food category to figure in the top 10. A strong

brand name, superior quality products and an enviable distribution network had helped BIL become the

market leader with 40% share in the Indian biscuit market.

The company has rationalised its product portfolio, pruning the number of brands from 35 to 25, so thatit can devote greater attention to key businesses.

In 1998, the company moved into the mass market for biscuits introducing low-priced varieties under

the umbrella brand, TIGER.

The success of this brand has enabled Britannia expand its market share in the "Glucose" biscuit market

from 10% to over 20%. While growth rates in the mid-priced and premium biscuits have flagged, it is

TIGER which has kept Britannia's biscuit business roaring.

BRITANNIA PLANS TIGER VARIANT

BRITANNIA Industries Ltd to planning add another flavour to its existing Tiger brand of products

following its success story in the rural areas

Earlier, with its two previous glucose biscuit brands -- Glucose D and Circus -- it had only 10 per cent of

the market-share. But the single-minded effort of conceiving and promoting Tiger in the mass rural

market has paid dividends. Mr Tiwari spoke about the distribution channels that have brought results in

the rural market. Apart from stockists and sub-stockists, Britannia has used traditional haats and melas

to promote the Tiger brand. It has made the ongoing Kumbh Mela a major promotion and sales outlet.

Whenever they come to know of a major mela or haat, they ensure that their brand is stocked in large

quantities, In fact, low cost distribution channels are one of the main challenges in rural marketing as

extensive and sparsely populated areas have to be covered for the desired results. ``Corporates who

want accurate rural market research to be done need to be aware that the costs arehigh, the time taken

is more and productivity is low,'' said Mr Diwakar Srivastava, Research Manager, A.C. Nielsen. Mr

Srivastava, who has been involved in rural market research in North as well as South India, believed

that penetration of products was higher in the South due to better road infrastructure, larger areas

under electrification and higher literacy levels.

Market share:

Britannia-43%, Parle-33%, Bakemans-11% and others 13%.

RURAL MARKET - A WORLD OF OPPORTUNITYAccording to a National Council for Applied Economic Research (NCAER) study, there are as many

'middle income and above' households in the rural areas as there are in the urban areas. There are

almost twice as many 'low middle income' households in rural areas as in the urban areas. At the

highest income level there are 2.3 million urban households as against 1.6 million households in rural

areas.

Britannia Industries launched TIGER biscuits especially for the rural market. It clearly paid dividend. Its

share of the glucose biscuit market has increased from 7% to 15%.

Today TIGER is a Rs. 200 crore brand with a market share of 24%. Having grown at 25% to 30% in the

past growth is fast slowing down.

TIGER has been positioned as a nutritional product with the new logo being "EAT HEALTHY THINK

BETTER". The high nutritional value includes carbohydrates, proteins, calcium, etc.

The company's latest offering is "Britannia Tiger Chai Biscoot". The product has been launched in

Maharashtra, West Bengal and Karnataka on the flagship "TIGER". The TIGER brand currently has four

variants including TIGER Cashew Badam, TIGER Protein, TIGER Coconut and now Chai Biscoot.

Britannia with its TIGER brand of biscuits with its low priced and convenient package products designed

for the rural masses have been other pioneers in rural marketing. Thus, Britannia has been able to

derive more than 30% of their revenues from rural market.

THE BRITANNIA TIGER LAGAAN MATCH

This was how the campaign took place:

You needed to purchase a 100 gm. Pack of TIGER biscuits for which you will get a special "Britannia

Lagaan Booklet". 10000 early birds will win a prize. There is also the possibility of being selected in the

team that will play against the "Lagaan XI" team.

Britannia pumped in around Rs. 2.5 erodes to ensure the success of this promotional offer. Analysts say

that there was an incremental 20% jump in sales when the scheme was on.

This promotion was done in both the rural and urban areas, thus it not only gave the company anincrease in the sales but also gave the brand and the company recognition.


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THE BRITANNIA TIGER BACHAO AANDOLAN

This was conducted by Britannia Industries with a view to reach its rural customer and also the target

segment. This took place in the year 1998 when the company undertook the responsibility of protecting

the tiger community hand in hand with the forest department of Gujarat, MP, etc. This was done by

selecting 12 kids who were interested in the campaign. The children were selected from a village in

Rajasthan. The campaign is still being carried out by the company and is one of the successful ones. It

has become a social responsibility of the company.HOARDINGS

There are hoarding, which are put up by the company in the rural areas. The hoardings are mostly put

up with complete information regarding the product. The information is given in the local language in

order to let people know about the product. The hoardings also have the mascot tiger which emphasises

a strong healthy individual.

T.V.

The various ad campaigns throughout the country are done by preparing a single advt but the language

in which it features is according to the regional language of that state. The ads include famous

personalities like Saurav Ganguly. The ads mainly focus on the children and emphasise a strong diet for

a healthy mind and body.

School children in rural areas are often given small packs at a confessional rate and at times they are

distributed as free samples.

Ps OF TIGER BISCUITS

1. Pricing & packaging:

The product is specially designed for the rural market and the economy class.

Packing Price

250 gms Rs. 10

100 gms Rs. 4

75 gms coconut Rs. 5

The product is priced very low giving equal importance to quantity and price both of which are important

features for the success of a product in the rural market.

Britannia TIGER has been able to meet both the norms as mentioned above and has met with roaring

success in rural areas.

As the definition goes, the amount that the consumer is ready to pay for the service granted is what is

price. This is very true in case of TIGER biscuits. An entry into the market was made only after studyingthe complete details and profile of the market and the result was a total success.

2. Packaging:

The products are packed in airtight plastic wrappers in an attractive bright red and yellow colour, which

catches the eye and is an important feature to market a product in rural areas. The important feature is

the energetic tiger shown on the pack, which emphasises good health, comes your way with Britannia

TIGER.

The packaging also gives complete details of the price, packaging date, ingredients and the nutritional

value. A complete plant product, it is denoted by the green dot. Since the targut is the economy class

and the rural segment, the main feature is thai Britannia TIGER also features the product name in Hindi.

3. Place:

The distribution network is very strong.

Manufacturing Plant

Location: Andheri. Outsourced to Oasis Enterprises

C & F Agent: At district level in various states of India

Wholesaler: At taluka levels in various states

Retailer: Retailers in villages are supplied by the wholesaler at the taluka level

Final Customer

4. Positioning:

Positioned mainly for the rural segment and with a new slogan "Eat healthy, think better", as a brand of

premium quality with factors pertaining to health and needs of the consumer being the main factor.

PROBLEMS FACED BY TIGER

Competition:

From local players in many states who infringe with low quality products and similar packaging. Since

the rural customer depends mainly on the packaging available, it is easy for competitors to sneak in the

market affecting the market share of TIGER.Saturation:


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Experts have said that TIGER has reached saturation in its PLC. Thus a decline is possible in the near

future resulting in decline of the company share of the whole.

BRITANNIA LOOKS BEYOND BISCUITS

Bakery major Britannia Industries is planning to "go beyond biscuits'' Nusli Wadia, Chairman, said.

BIL has a presence in biscuits, breads and cakes mainly with a 37 per cent market share. Mr. Wadis said

the company's future growth could be either through acquisitions or through an organic growth. Its new

manager Vinita Bali said BIL would ramp up its distribution network by tapping the malls. She saidBritannia now had six power brands each exceeding Rs. 100 crore in sales. She said exports and rural

marketing were the two thrust areas and BIL, which penetrated the rural market riding the Tiger brand,

was now planning to take its upmarket biscuits and tiffin cakes into rural areas.

Addressing shareholders, Mr. Wadia said amid steep increases in prices of agro-products, the main raw

materials; it had launched a strategy of forward buying of commodities through commodity exchanges

as a hedging mechanism. Alongside, it was also implementing 14 projects aimed at improving

productivity, bettering recipes and toning up logistics. A further VRS was proposed to trim the 2,500

workforce.

CONCLUSION

In the end it is certain that FMCG companies will have to really gain inroads in the rural markets in order

to achieve double digit growth targets in future. There is huge potential and definitely there is lot of

money in rural India but the smart thing would be to weigh in the roadblocks as carefully as possible.

The companies entering rural market must do so for strategic reasons and not for tactical gains as rural

consumer is still a closed book and it is only through unwavering commitment that the companies can

make a dent in the market. Ultimately the winner would be the one with the required resources like time

and money and also with the much needed innovative ideas to tap the rural markets.

A mention of rural India may conjure up an image of abject poverty in the minds of many people. This,

however, does not hold true in the case of a few fast moving consumer goods (FMCG) companies that

have over the years been giving their rural operations a renewed thrust. Why would these companies be

tapping into the rural markets in the first place?First, let's take a look at the distribution networks of three leading FMCG companies in India -

Hindustan Lever Limited, Colgate Palmolive and Britannia. These three companies are market leaders in

their core areas and much of their success has to do with the intricate marketing networks they have

developed over the years. Hindustan Lever, as would be expected, has the largest reach in terms of the

markets serviced. Colgate, on the other hand, has adopted a concentrated approach by focusing on

fewer markets. Britannia, compared to the first two, has a much smaller reach.

Colgate and Britannia now derive 35% and 30% respectively of their turnover from rural markets.

Britannia and Colgate, apart from Hindustan Lever, are the only FMCG companies in India that derive

over 30% of their revenues from rural markets. Britannia has rejuvenated its rural thrust by the launch

of Tiger biscuits, while Colgate has been attempting to woo the rural masses by offering low priced

products in convenient packaging.

The success of these companies has as much to do with understanding the psyche of the rural family as

it have to do with a rural distribution network. A typical rural family is a price conscious consumer and

this is where the key to success lies. Hindustan Lever, for example, extended its strategy of volume

driven growth into rural markets and met with much success. Britannia on the other had launched Tiger

to take on the existing economy brands in the market.


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rural consumers prefers mostly herbal/cool oils,

e.g- Navratna, himtaj, Himgange,etc. 31% of the rural consumers

prefers herbal oils because of their multipurpose use. They use

these oils as medicine also. 25% of the rural consumers prefers

dabur amla, third place occupied by Maicos Paraschut which is

prefers by 21% of rural consumers. 18% consumers prefers Bajaj

Almond and 5% prefers some other hair oil brands.CONCLUSION:

As I has analyzed the various data based on questionnaire, a fact has

came into light that HULs products are the most known and popular Brand

in context of home FMCG products in rural market followed by DABUR, ITC

and P&G. Because of huge product line, cheaper cost, brand loyalty, goodpublicity and advertisement, the rural consumers generally prefers the

products of HUL in all segments.

Except it, people firstly prefer for good quality and comparativelylow prices products .

SUGGESTIONS

The rural market is very large in compare to the urban

market as well as it is more challenging market. The consumer wants those

products which are long lasting, good, easy to use and cheaper. The

income level of rural consumers is not as high as the income level of urban

consumers thats why they want low price goods. It is one of the reason

that the sell of sachet is much larger in the rural area in all segments.

It is necessary for all the FMCG major companies to provide

those products which are easy to available and affordable to the

consumers. It is right that the profit margin is very low in the FMCG

products, but at the same time the market size is much large in the rural

area. The companies can reduce their prices by cutting the costs on the

packaging because the rural consumers dont need attractive packaging.


19/29

Abstract:

70% of the Indian population lives in ruralareas. This segment, commonly referred to asthe 'bottom of the pyramid', presents a huge

opportunity for companies. Unilever's Indiansubsidiary, Hindustan Lever Ltd (HLL),considered one of the best-managed companiesin India, understands the importance of ruralmarketing.

The trigger point came when a local firm Nirma,through its new product formulation, pricing anddistribution challenged HLL's detergent

business. Nirma's attack from below made HLLrealise its vulnerability as well as identify a new

opportunity. Since then, HLL has launchedvarious initiatives to reach out to the ruralconsumer. It has changed its productformulations and deliveries.

It has begun a number of initiatives in terms of widening distribution reach throughtraditional as well as unconventional channels. HLL has also empowered rural women byassisting them in obtaining financial assistance through its project shakti.

Everybody wants brands. And there are a lot more poor people in the world than rich people.

To be a global business and to have a global market share you have to participate in allsegments.

- Keki Dadiseth, erstwhile Chairman, HLL1.

The basic objective of Project Shakti is to economically empower underprivileged rural

women by creating income-generating capabilities and providing a sustainable micro-enterprise opportunity in addition to improving rural living standards through health and

hygiene awareness.

- Sharat Dhall, Marketing Manager -Rural, HLL2.

Introduction

In the early 2000s, around 700 million people, i.e. 70% of the Indian population lived in6,27,000 villages, in rural areas. Of this, 90% were concentrated in villages with populationless than 2000.3According to a study conducted in 2001 by the National Council for AppliedEconomic Research (NCAER), there were as many "middle income and above" householdsin rural areas as there were in urban areas.

There were almost twice as many "lower incomehouseholds" in rural areas as in urban areas.

There were 2.3 million "highest income"households in urban areas as against 1.6 million
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in rural areas.

NCAER projections indicated that the numberof "middle income and above" households wasexpected to grow to 111 million in rural India by

2007, compared to 59 million in urban India.4

Gone were the days when a rural consumer hadto go to a nearby town or city to buy a branded

product. The growing power of the ruralconsumer was forcing big companies to flock torural markets. At the same time, they also threwup major challenges for marketers.

Unilever in India - Rural Marketing

Initiatives Case Details Case Intro 1 Case Intro 2 Excerpts

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ICMR HOME | Case Studies

Collection

Case Details:

Case Code : MKTA008

Case Length : 17 Pages

Period : 1998-2004

Pub Date : 2004

Teaching Note :Not Available

Organization : Unilever, Hindustan

Lever Limited

Industry : Fast Moving Consumer

Goods

Countries : India

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Rural Marketing Initiatives case

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impressive rate of 20 -25%.5

Several companies were

taking rural marketing

seriously, one of them being

Hindustan Lever Ltd (HLL),

Unilever's Indian subsidiary.

In 2004, HLL was India's largest FMCG company, with

30 power brands (Exhibit: I), turnover of over Rs.

10,000 crores and 40,000 employees. HLL derived

around 50% of its sales from rural areas. HLL's rural

marketing initiatives began way back in 1988, when

the company had launched 'Wheel' for the rural and

lower income urban consumer.

These efforts had intensified since the late 1990swhen HLL like many other companies faced flat growth

in the urban markets. In early 2004, as it reviewed its

past performance, HLL realized that bulk of its future

growth was likely to come from rural areas. The

challenge for HLL was to exploit this opportunity in a

profitable manner.

Background Note

HLL's history could betraced back to 1885 when

the Lever Brothers set up

"William Hesketh Lever", in

England. In 1888, the

company entered India by

exporting 'Sunlight', its

laundry soap. In 1895, the

Lifebuoy soap was launched

in India followed by 'Pears'

in 1902, 'Lux' flakes in 1905

and 'Vim' scouring powder

in1913. In 1930, the

company merged with

'Margarine Unie' (a

Netherlands based

company which exported

vanaspati to India), to form

Unilever. In 1931, Unilever

set up it first Indian

subsidiary, the Hindustan

Vanaspati Manufacturing

Company for production of

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Selling in Rural India