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Rural Market

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Rural Market

November, 2011

Indian Rural Market: Brief Overview

Greater attention from marketers in every sector, intense government support, and increasing self-reliance are strengthening the rural sector in India. The fact that about 72 per cent of the Indian population resides in hinterlands brings home the point that the Indian consumer base is highly supported by the rural population; which is eventually driving revenues for many major conglomerates operating in diverse markets in India.

A report by National Sample Survey Office (NSSO) has revealed that rural households' expenditure on durable goods has increased from 3.1 per cent (1987-88) to 4.8 per cent (2009-10), confirming that the expenditure on non-food items like durable goods has increased over the past few decades.

Companies across sectors such as fast moving consumer goods (FMCG), telecom, pharmaceuticals, banking, retail and even cosmetics are devising strategies to attract the rural clan. Certain sector-specific developments that took place on the Indian rural canvas are discussed hereafter.

Retail in Rural India

Retailers are increasingly eyeing hinterlands to give a boost to their revenue and sales. They are not only exploring new markets, but are even ready to alter their businesses and products to suit the rural population of India.

Identifying the 700 million-people-strong rural India as a 'huge opportunity', global beverages major Coca-Cola has decided to alter its business to suit the preferences of people residing in rural areas. The company would work on packaging, pricing, accessibility and availability of the products to achieve the stated target.

The Kishore Biyani-led Future Group has stated that it will launch a rural wholesale and distribution business under the 'Aadhar' brand. The company already operates a retail chain under this brand. India's largest retailer would spend up to (US$ 19.76 million) over 2011-14 to build 65 'Aadhar Wholesale' outlets across India and expects the business to generate revenues of (US$ 790.3 million) by the end of 2014.

FMCG

Higher disposable income in the hands of rural households along with massive advertisements by the market players, would take rural FMCG market from current (US$ 17.37 billion) to a market size of over (US$ 21 billion) by 2012, according to a study by a leading industry body. This entails a compounded annual growth rate (CAGR) of 10 per cent in totality for rural and semi-urban areas.

FMCG players like HUL and ITC have already established their foothold in hinterlands.

A recent study has revealed that lesser developed eastern states such as Bihar, Orissa, Chhattisgarh and Assam are leading rural sales in India. The analysis has strengthened the fact that rural markets are driving consumption of FMCG products. In these eastern states, the rural FMCG sales to the total, accounts for more than 50 per cent, whereas states like Punjab contribute 40 per cent.

Automobiles

Rural India has been the propeller for automobile companies, especially in the two wheeler segment. The two-wheeler market derives about 45-50 per cent of its sales from the rural market.

Hero MotoCorp has recently stated that sales (in its two-wheeler segment) from rural areas have increased from 38 per cent in 2009 to over 46 per cent currently.

Also, as part of its initiative to emancipate the poor, Hero Cycles may soon tie-up with insurance firms to provide health cover to its rural customers. The company is contemplating over the provision under which it would pay health insurance premium for the poor customers on purchase of its bicycles.

Consumer Durables

India's consumer durables market is anticipated to expand by 40 per cent in 2011-12, according to a study 'Rise of Consumer Durables in Rural India'.

With an intention to empower rural India with better lighting solution, Luminous Power Technologies Limited has launched light emitting diode (LED)-based Solar Lighting Solution that would be a low cost option for rural home lighting requirements. Luminous Power Technologies Limited is a provider of power backup solutions for home, commercial, telecom towers and renewable energy systems.