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Rural India Presents Notable Growth Opportunity
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Rural India Presents Notable Growth Opportunity

Prashant Singh, VP, Nielsen India

Executing the ‘growth’ agenda is priority number one for marketers in growth economies like India. Prime amongst the list of charting the roadmap for growth is usually the identification of growth opportunities that are 1) linked to a marketer’s core competency 2) based on a thorough understanding of a consumer segment 3) sustainable enough to generate a return on investment and ensure future earnings.

This is far easier when the ‘points of origin’ are fixed. For instance, companies present in established categories and geographies are usually able to get a fix on the first few steps. The exercise gets much harder when trying to predict which categories and geographies to enter anew or, even with an existing focus, understand where competitive threats might emerge from.

Observing categories that are well developed across market types (urban and rural) but are still growing a healthy clip can offer an early view of what a viable opportunity can look like. More importantly, evaluating their growth rates across existing and emerging areas of consumer demand add greater clarity and comprehensiveness to strategic planning.

A comparative study of categories that are growing in urban and in rural India despite their large and established size reveals a tempting list of opportunities. Not only are these categories well penetrated and therefore ‘here to stay’, they are also gaining greater ground in the Indian hinterland even as they grow in urban India. This mix of maturity and momentum hint that the next surge of growth will most likely reside within these categories and similar counterparts.

Signals of sustainability

As markets expand in terms of breadth and depth, it is not uncommon to see this abetted by a greater distribution push. The search for growth is ably propelled forward by manufacturers and marketers racing to place their brand on shelves in a greater span of geographies and store types to cater to emerging demand and even create it through sheer availability. However, a mere presence of a phase of ‘trial’ by new consumers with easier access to these brands can sometimes be misleading and not always sustainable. A more robust indicator tends to be the rise in ‘per dealer offtake’ or the rise in sales for these products in stores where they were available earlier. Such a rise has been occurring for some categories and this indicates a stronger ‘consumer pull’ with these categories occupying a genuine permanence in the rural shopping basket.

Catalytic causes

A few factors are catalyzing this growth. Nearly a decade ago, Nielsenhad identified the trend of ‘commodity to branding’. This phenomenon appears to have taken root and continues to drive category and market expansion. In addition, consumer trial through “Low Unit Packs” is widening the ambit of these categories and bringing into their fold large numbers of consumers who are increasingly exercising their desire for packaged branded goods as markers of a better, healthier lifestyle. For the “value-vaulters”, the LUP represents value for money, as they are able to flirt with premium or impulse products without a huge outlay. Lastly, geographic presence and the availability of these products in proximal markets now mean faster replenishment cycles that is likely to translate into greater per capita consumption.

Implications for marketing

These paradigm shifts will mean that rural marketing practiceswill no longer be restricted to a specialization – they will become part of mainstream marketing and a necessary criterion for marketing knowledge amongst India’s marketing community.

Today, most FMCG categories (80%) are growing faster in rural as compared to urban India. This growing importance of rural India will also mean that competitors (both regional players and categories with a strong regional franchise) will influence marketing plans. As these categories expand, they will influence the way adjacent categories and emerging alternatives will seek to market themselves.

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More importantly perhaps, marketing must undergo a change. Whether it is creating products especially for rural markets; the ascendancy of the shopkeeper as the advocate for brands; or a hectic pace of brand switching as consumers experiment with a widely available and accessible array of choices – every aspect of rural marketing will have to align with the oncoming wave of consumer demand in rural India.