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Rural Market

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Rural Market

February, 2011

The empowerment spree of rural India is on its high from the last couple of years due to which the economy pertaining to this section is showing impressive growth. The propellers for this progress include government initiatives and schemes, infrastructure development, industry projects across the country and the emphasis on local-employability.

Rural Indians are developing desire for packaged foods, personal care products, consumer durables and IT products, two- and four-wheelers, and fashion accessories. Over the last five years, some consumer product companies have recognised the potential of rural markets and invested time and resources to tap into this opportunity - understanding and segmenting the consumer, based on their spends and lifestyles.

Some companies have even re-engineered products, pricing and packaging to customise features and value relevant for these markets. For instance, Godrej has introduced chotukool refrigerator; Vortex has launched low cost ATMs and Nokia has developed Life tools - a mobile application that provides access to agricultural, educational and entertainment content. These innovative features and products have facilitated a better lifestyle for the people residing in hinterlands. Some players have developed new communication and distribution channels within the rural agents (HUL's Project Shakti; Tata Tea's 'Gaon Chalo') and some have created completely new products.

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

FMCG

According to a study by research firm The Nielson Company, the fast moving consumer goods market (FMCG) in rural India is tipped to touch US$ 100 billion by 2025 on the back of "unrelenting" demand driven by rising income levels. According to the study, rural India now accounts for more than half of sales in some of the largest FMCG categories.

The study found that:

  • Rural purchasing power has grown faster than urban in the last six quarters
  • Faster growth in rural is not limited to penetration; today the rural consumer’s frequency of consumption is growing faster as well, demonstrating their entrenchment in these categories
  • Instant noodle sales are growing nearly twice as fast in rural India compared to urban in both penetration and frequency
  • Seemingly ‘urbane’ brands in categories like deodorant and fabric softener are growing much faster in rural India than urban

Several FMCG firms, including ITC and DCM, have been registering faster and higher growth 1`in the sales of their goods in the rural markets as compared to the urban markets.

Some of the 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.

At present, rural consumers spend about US$ 9 billion per annum on FMCG items and product categories such as instant noodles, deodorant and fabric, with the pace of consumption growing much faster than urban areas, as per the findings.