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Rural Market

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Rural Market

July, 2010

The Indian growth story is now spreading itself to India's hinterlands. The rural consumer market, which grew 25 per cent in 2008, is expected to reach US$ 425 billion in 2010-11 with 720-790 million customers, according to a white paper prepared by CII-Technopak, in November 2009. The figures are expected to double the 2004-05 market size of US$ 220 billion.

The Union Budget for 2010-11 has hiked the allocation under the National Rural Employment Guarantee Act (NREGA) to US$ 8.71 billoin in 2010-11, giving a boost to the rural economy.

FMCG

According to figures released by market researcher Nielsen, demand for personal care products grew faster in rural areas than urban areas during the period January-May 2010.

In shampoos, rural demand grew by 10.7 per cent in value terms, while in urban markets, it rose by 6.8 per cent. Similarly, toothpaste sales grew by 9.1 per cent in rural India and by 4.4 per cent in urban markets.

Several fast moving consumer goods (FMCG) companies such as Godrej Consumer Products, Dabur, Marico and Hindustan Unilever (HUL) have increased their hiring in rural India and small towns in order to establish a local connect and increase visibility.

Swiss FMCG giant, Nestle plans to make further inroads into the rural markets. The company has asked its sales team to deliver "6,000 new sales points every month in rural areas" to expand its presence in Indian villages, according to Antonio Helio Waszyk, Chairman and Managing Director, Nestle India .

Retail

The rural retail market is currently estimated at US$ 112 billion, or around 40 per cent of the US$ 280 billion Indian retail market, according to a study paper, 'The Rise of Rural India', by an industry body.

Hindustan Unilever (HUL) is planning to significantly increase its rural reach. According to Harish Manwani, Chairman, HUL, the quality and quantity of rural coverage will go up to the extent that "what we have done in the last 25 years we want to do it in the next two years." Currently HUL products reach approximately 250,000 rural retail outlets and the company intends to scale it up to nearly 750,000 outlets in two years time.

Direct selling firm Tupperware India, known for its storage containers plans to foray into the rural markets in the next two-three years. "We have solid plans for the rural market. We are working on bringing products for rural people as well," said Asha Gupta, Managing Director, Tupperware India.

Castrol India is pushing its rural sales by building up a distribution infrastructure to reach out to all villages. According to Ravi Kirpalani, Chief Operating Officer, Castrol India, "Our distribution now reaches 5,000-7,000 towns and villages, but we are planning to take our products to six lakh villages with a population of less of 5,000.''

Automobiles

Car sales in rural India have been on the increase in the last three years since the government announced various schemes such as farm loan waiver etc, for the rural population.

Maruti Suzuki's share of rural sales has increased from 3.5 per cent to 17 per cent in the last three years. Mahindra & Mahindra (M&M) is now selling more Scorpios in rural and semi-urban markets. Scorpio sales have increased from 35 per cent to 50 per cent in the last two years.

Toyota Kirloskar Motor (TKM), in which Japan's Toyota Motor Corp holds an 89 per cent controlling stake, is planning at selling 40 per cent of its cars in rural markets in India. According to Hiroshi Nakagawa, Managing Director, TKM, "We are aggressively expanding our dealership footprint in India and quite a significant portion of this will be in country's heartland. By end of 2010, we plan to have 150 dealers across the country."

Yamaha is also planning a major initiative in rural India by launching more models in the affordable price range in 2010. "We are very strong in Tier 1 and Tier II cities. Now onwards, our focus will be rural India (Tier III towns). We will launch more models in the affordable price range to dominate the rural market," according to Pankaj Dubey, National Business Head, India Yamaha Motor. At present, around 15 per cent of its sales come from the rural market and Dubey sees this demand increasing substantially in 2010.

Tata Motors is also making efforts to sell its pick up truck Ace in rural markets. It has already opened 600 small outlets for the Ace in rural and semi-urban markets. It has also tied up with 117 public sector, gramin (rural) and co-operative banks to help small entrepreneurs buy the vehicle.