Scanning through the performance of successful mass marketers in India, the common trait is that they have capitalised on the rural opportunity exceedingly well. As per market research reports, rural FMCG sales are growing upwards of 15% and are at their best in the last three years. The six lakh villages that inhabit 68% of the country’s population now contribute to 50% of our GDP.
However, peculiarities of the rural ecosystem pose many challenges. There is the risk of oversimplification of these peculiarities, thereby diluting the effort-reward equation.
Roadblocks to success
Rural India is not one geographic cohort. Thus the prioritisation, portfolio and route to market choices in a generic form often fail to suffice. Less than a third of India’s villages makes up for over three-fourths of total rural consumption. There is near total dependency on the informal wholesale channel to cater to these villages. This becomes self-limiting as the wholesale channel has a predisposition to favour existing demand and is limited in its ability to develop new business.
Technological advancements today offer plug-and-play low cost solutions in the form of digital maps, layered with demographic and infrastructural inputs, to micro target route-to-market initiatives. Thanks to shared channel partner networks and scale demand, the cost of controlled route to market interventions is no longer prohibitive. The geographic location of these stock points is done using detailed inputs on population, income development indices, infrastructure availability and demand potential in the catchment area.
Rural India over indexes the consumption in key FMCG categories like biscuits, soaps, personal care and hot beverages. These categories will continue to lead the penetration drive of branded products in rural households. Processed foods would accelerate and sustain long term growth.
Rural consumers are inspired by the affluent urban lifestyle. This is visible in the explosive growth of smartphones and data consumption in the hinterlands of the country. This fundamentally modifies the demand fulfilment structures.
What is a ripple today will become a strong wave with emergence of e-commerce feeding demand fuelled by digital media. This may not be ubiquitous across all categories but medium involvement/socially visible categories like fashion, small electronics, kitchen appliances and gifting will be quick on the draw. Within these, categories where access to assortment is a big limitation for rural India, fulfilment led by new age channels will see explosive preference.
New age channels also offer an exciting opportunity to rapidly test and learn variations on the marketing mix. A sustainable play in a manner that is not in conflict with traditional channels will necessitate a reinvention of the product portfolio and pack price architecture. Additionally, new age channels may have the potential to hurt existing channel partner economics. Herein the challenge at hand is in
readying the partner universe for new ways of working.
Building competencies and service offerings that distinctively serve different channel and shopper needs, including rural, will require a rewriting of many strategies.
Hemant Rupani is director — sales, Mondelez India