In absolute numbers, the rural population of India far beats the number of Urban Indians who live in five thousand different metros, cities and towns across the country. In spite of this statistic, rural markets have been difficult to penetrate. And this becomes more pertinent for the FMCG Industry which provides products and consumables that are of value and benefit to all consumers alike. While marketers grapple with challenges related to logistics, distribution, infrastructure and tax, it is increasingly becoming a constant endeavour to engage the rural consumer and create effective methods to reach out to a very specific profile of consumers who are slowly becoming “Rurban”.
The first panel discussion at the CII FMCG Conference on New Opportunities – Wider Markets – Sustainable Businesses, here in New Delhi, yesterday, was dominated by a discussion on Urban vs Rural Markets. Divyaroop Bhatnagar, Managing Director of YFactor Marketing moderated the session and raised a significant question on whether the rural consumer was inherently different from his urban counterpart or if this distinction is a result of media exposure or a basic stage of evolution. He added that there exists a need to reach out on a larger magnitude to the rural consumer. And this needs to be done in a milieu where the challenge lies in “organising the fragmented small brackets of markets in rural India and using the available resources in the most efficient manner.
Harsh Rai, Sales Director, Food Business of Pepsico India, further provided a careful analysis of the profile of the 80 crore rural Indians being wooed by brands. Providing essential facts, he pointed out that in 15 years, the capacity of our rural market, which is growing at the rate of 25 per cent, will be more than the entire consumer market in South Korea. The STAR or the Small Town and Rural Consumer who develops a mindset by virtue of the education that he receives and the increased access to technology, gradually wants to be “distinctive rather than distinguished”, said Rai.
He added to this profile of a rural consumer by highlighting the values of family, religion and community that govern them and basic worries like, not being able to save enough money or provide enough nutrition to the family. While elucidating the fears of this set of consumers like, the daughter’s marriage and the life of the breadwinner, Rai commented on how most of these also echo the sensibilities of the urban consumer. The rural consumer hopes for better personality and for better facilities for the family, which is only similar to the thought process of the urban consumer. For the psyche of the rural consumer, Indian brands are much more significant than international brands, where branded is perceived as more expensive and home-made is of greater relevance than anything packaged.
Rai also talked about factors which went into brand recognition for these consumers like, colour of the pack, the name and spelling and the logo or symbol of the brand. The rural consumer who “does not see fake as spurious” and is constantly seeking more value for money is impacted by television and driven to a large extent by “word of mouth and retailer persuasion”. Rai thus managed to craft an interesting discussion around whether the rural consumer was fundamentally different from the urban consumer and simultaneously demarcated the differences which could very well be owed to exposure and influences.
The challenges in distribution and logistics in rural trade, particularly for FMCG businesses are affected by taxes, which have been acting as both disablers as well as enablers. This was taken forward by Yogesh Mathur, Group CFO of Moser Baer who talked about the impact of GST in this regard and its implementation leading to a unified distribution system with a compressed circuit and a much easier supply chain mechanism. However, Mathur pointed out legislative concerns related to the GST structure and a consequent delay in implementation allowing the system to stabilize only in the next two years.
Pankaj Joshi, Deputy GM, Corporate Logistics for Mahindra Logistics talked about the need to focus on availability and conclusively signalled at “collaboration, consolidation and technology intervention” as viable solutions to maximize penetration into rural markets.