TERM PAPER

ON

“Strategies to counter spurious products with reference to

FMCG in rural market”

Submitted in partial fulfilment of the post graduate diploma in Management

(Marketing) at Xavier Institute of Social Service, Ranchi

By

MD FAISAL
ROLL NO: 05
SESSION- 2017-2019
Under the guidance of

Dr. Amar Tigga

XAVIER INSTITUTE OF SOCIAL SERVICE,

DR. CAMIL BULCKE PATH, RANCHI

 ACKNOWLEDGEMENT

I would like to express my gratitude to Prof. Dr. Amar Tigga for giving me the
opportunity to work on this project. Without this, this project would not have
come to culmination. This project took me deep inside the topic and helped me
to understand various concepts, facts related to FMCG industry.

I would also like to acknowledge the help that I received from XISS Library.
Resources available from various websites, and websites of FMCG companies
helped to carry out this project.

This project involved the collection and analysis of information from a wide
variety of sources and the efforts of many people beyond me. Thus it would not
have been possible to achieve the results reported in this document without their
help, support and encouragement.
 ABSTRACT

Rural market is the most happening market for all the FMCG companies to
penetrate and increase volume. As urban market is getting saturated and FMCG
companies are seeing rural market as their potential market to sell products. But
to tap rural market is not that easy task because of various obstacles and
challenges. One of the most crucial challenges for every FMCG company is the
presence of spurious products. Selling of spurious products does not only create
negative impact on the business of the branded FMCGs but also lessen the value
of the brand. According to the study done by AC Nielsen (2006); reveals that
Indian FMCG market loses US$ 500 every year due to spurious products.
According to the report of Brand Protection Committee (BPC) formed by
Federation of Indian Chambers of Commerce & Industry (FICCI) in 2006; 10%
of the FMCG market is accounted for by fake products. 10%-30% of the
cosmetics and toiletries and packaged food items were spurious. Many studies
have been taken in this regard but most of the studies were in the form of
project report to collect the relevant data only. This study will focus on the
strategies to counter fake products in the rural market to get better results.

Keywords: Rural market, Spurious product, FMCGs, Strategy

 INTRODUCTION

Rural market has emerged as one of the crucial market for FMCG sector. Since
last ten years especially FMCG companies have started exploring rural market
for two reasons. One is due to saturation in urban market and second is because
of potential lies in rural market. There are some facts which shows the
importance and potential present in rural market are: rural population is
83,30,87,662 (according to Census 2011), which accounts for 68.84% of the
total population of India, according to Census 2001, 593731 villages are
inhibited. Increase in sales volume, increase in disposable income of rural
people, better infrastructure, roads and distribution system attracting marketers
to focus on rural market. A latest market trend shows that there is a huge scope
for companies to penetrate rural market. 46% of soft drinks sales happened at
rural areas, 59% cigarette were consumed by rural people, 53% of FMCG sales
done in rural market. As per NCAER (National Council for Applied Economic
Research) study conducted in 2002 the rural market stands at an estimated size
of Rs. 123000 Crore, FMCG at Rs 65000 Crore, Durables at Rs 5000 Crore,
Agri-inputs at Rs 45000 Crore. Rural literacy rate increased from 58.74% in
2001 to 68.91% in 2011 (As per census data 2011). Apart from all these
favourable conditions and statistics FMCG companies still faces a problem due
to sales of spurious products in rural market. FMCG companies like HUL, ITC,
Dabur, Parle-G and many others successfully penetrated rural market since last
10 years but also finds the problem due to emergence of fake product
manufacturers who are using the lookalike packaging scheme, spellalike names
and even copied the same name, packaging and address of the original FMCG
brand. As per study conducted by ASSOCHAM (The Associated Chambers of
Commerce and Industry of India) in the year 2007, estimated a loss to the
industry was Rs.300 billion. One of the biggest loser was the FMCG sector
losing Rs. 17 billion every year due to counterfeit products. The emergence of
spurious or fake product manufacturers is a matter of concern for branded
FMCG companies in rural market because it is mostly found in rural areas due
to lack of awareness in rural people.

Spurious or fake or counterfeit products are also affecting the business of

branded companies by hurting their brand image and value. Spurious products
are broadly divided into three categories:
 1. Fake/Duplicate products: Manufacturer of fake or duplicate products
uses the identical name of the product, packaging, colour scheme, logo
and even the same name and address as the genuine manufacturer.

2. Look alike products: Look alike products are those products where
manufacturer other than original producer cleverly uses the similar
looking packaging or colour or design or logo scheme to deceive the
customers.

3. Spell alike products: Spell alike products use names which are similar
sounding or similar in spelling (for example “Viks” or “Vix” for “Vicks”,
“Fire & Lovely” for “Fair & Lovely”, “Nilima” for “Nirma”, “Daily
Milk” for “Dairy Milk”).

Why rural market?

It has been observed that spurious products are more prevalent in rural market.
Rural market is more affected by spurious products because of illiteracy and
unawareness of rural consumers is much higher than their urban counterparts.
Role of retailer is also plays an important role in selling of spurious products in
the rural market mostly due to unawareness and high margin of profit.

Impact of spurious product on FMCG sector

In a study A.C Nielson found in its research that Eight out of ten consumers
who purchased spurious products felt cheated when they found that they
purchased a spurious product instead of a genuine. Of 30 FMCG brands
surveyed some had 20 or more look alike. There exist 45 different varieties of
P&G’s popular Vicks range of products. For every 100 stripes of genuine Action
500, there are 54 look alike while Vicks Vaporub and inhaler had about 20
clones. According to FICCI records (Business Line July 24, 2006) FMCG
market loses Rs. 2600 crore. Latest trends show that the FMCG industry in
India loses Rs.8000 Crore, which is about 15% of total market size, per year to
fake goods manufacturers.

Industry watchers point out that there are 128 ‘known versions’ of Parachute
Hair Oil, 113 of Fair & Lovely cream, 44 of Vicks VapoRub, and 38 of Clinic
Plus Shampoo. Name a product and you will find between 2 and 200 copies of it
that compete for customer attention. The government loses Rs.15000 crore and
the industry all in all loses Rs.30,000 crore to the counterfeits.
 REVIEW OF LITERATURE

There are many articles written in newspapers, paragraphs one can find in rural
marketing books and few research papers talking about the economic, health
and legal problems due to spurious or fake products. But a very few papers and
works have done in this direction to suggest counter strategies to protect brands.

In a book Cases in Rural Marketing an Integrated Approach Prof CSG

Krishnamacharyulu and Lalitha Ramkrishnan suggested some counter
strategies under case study “Fighting the fakes”. In this case study author
suggested three strategies Legal method, Surveillances and Upgrading
packages. Legal method a proactive strategy adopted by P&G against fake
manufacturers, Under Surveillance method where Coke actively keep
surveillance over fake manufacturers by connecting its employees with retailers
and direct consumers. In Upgrading packages a case of Dabur has been
discussed and how Dabur changed from the simple packaging of Lal Dant
Manjan to more complex packaging which is difficult to copy.

Formation of BPC (Brand Protection Committee) under FICCI (Federation

of Indian Chambers of Commerce and Industry) consists of about 50 legal
experts, manufacturers and research company AC Nielsen. BPC has put a
fourfold strategy by focus on enforcement and application of laws; publicising
the negative economic impact of fake products; taking direct action against
spurious manufacturers; traders, wholesalers and retailers. Also started a
website www.fake-busters.com; to aware people and increase information
about fake products. As far as rural market is concerned creating awareness by
launching a website is not a great idea.
 OBJECTIVES OF THE STUDY

1. To know about the various strategies adopted by FMCG companies to

counter fake products in rural market.

2. To suggest the holistic strategy to counter fake products in rural market.

 METHODOLOGY

This is an exploratory study with reference to FMCG sector in India. Research

is based on the observation and extensive study of secondary data available on
internet, books, magazines and journals. I have also done audit of few retail
shops in outskirt region of Ranchi district and to understand the marketing
strategy adopted by spurious product manufacturers. This study is limited to
observation and study of secondary data. Selling of spurious products is not
limited to rural market but it is more prevalent in rural areas so we have limited
our study and suggestions to the rural areas only.
 HOW TO IDENTIFY SPURIOUS PRODUCTS?

It is a herculean task to identify spurious product for rural consumers, who are
illiterate and unaware. There are some measures companies’ can take to educate
and aware rural consumers in identifying original branded products from
spurious products.

1. Communication on packaging done in local language in which consumer

can understand and differentiate original brand from spurious one.

2. Awareness programs through NGOs under CSR activity and joint venture
with local/Govt. schools to aware rural consumers about the issue and
harmful effects of spurious products. Live demos by showing original
products and spurious products with differentiating features and to help
rural consumers in identifying the differences in between.

3. Promotional campaigns by:

 Wall painting

 Nukkad-Natak (Street plays)

 Addressing the issues in front of people during Panchayat Sabha.

 Through Vans and other vehicles

 AALAP STRATEGY TO COUNTER SPURIOUS PRODUCT

After reviewing the extensive literature on fake products we have come up with
the concept of AALAP strategy to counter the problem of spurious products
specifically in the rural market. AALAP strategy is all about scanning the
market environment and then takes action according to the need of the company.
AALAP is stands for Analysis, Awareness, Legal Action and Protection.

Analysis: Analyse the market to find out the spurious or fake products affected
areas. Identify the markets (On geographical basis) where branded FMCG
companies facing problems due to presence of fake products. Prioritise them
from highly affected to low affected areas.

Awareness: First step after the analysis is to create awareness among the rural
people about the spurious products and problem of legal, health and economy
causes due to purchasing of spurious products in place of original products.
Awareness programs can be done in various ways like:

 Wall painting

 Nukkad Natak during Haat or Panchayat

 By playing Recorded CD/DVD movies in public transport

 In school, teachers may aware about the fake products to their students

 Retailers are the key influencers, so to provide them better services and
instruct them about harmful effects of spurious products to health of
people and also economy of the country

Legal Action: Legal Action can be taken after promoting awareness programs
in the affected areas by filing suit against fake product manufacturers.
Companies’ field force can co-ordinate with their loyal distributors, retailers and
aware customers to get the details about the spurious product manufacturers and
then file a case against them in the court. Legal Action must be taken step wise:

1. Create a relationship with local distributors, retailers and customers in the

rural areas with the co-ordination of field force.

2. Start a reward schemes for them who can provide the complete details of
the spurious product manufacturers.
 3. On the basis of detailed information, identify the spurious manufacturing
units and then take legal action against those spurious product
manufacturers.

There are few acts and regulations under Indian law to protect legal issues are:

 Trade Marks Act, 1999 & Trade Marks (Amendments) Rules, 2002

 The Patents Act,1970 & The Patent (Amendments) Rules, 2006

 Copyright Act, 1957 & Copyright Rules, 1958 & International Copyright
Order, 1999

Protection: A company must adopt protection strategy as a last step if it found

more than expected pass-off and duplicate products present in the market. It
resulted in negative brand image and companies’ suffered a huge financial loss.
Protection strategy includes the various internal and external tactics to protect
the brands which needed special attention and sufficient budget.

Internal tactics are related to changes in existing packaging, colour combination

or a logo and the change in packaging, colour combination and logo must be
different, complex and difficult to copy.

External tactics includes creation of task force who can audit the distributors
and retailers in every three months or randomly to know about the presence of
spurious products available in the market.

CONCLUSION
Rural market in India badly affected due to sales of spurious products. Still rural
consumers are unaware and unable to differentiate the branded FMCG products
from spurious products available at retail shops. Although in last decade literacy
level of rural consumers rises from 59% (Approx.) to 69% (Approx.), but still
availability of spurious products indicate the other factors behind its sales.
Spurious products badly affect the rural market sales of many branded FMCG
companies. FMCG companies have taken some initiatives to counter them but
unable to implement a holistic strategy to counter spurious product
manufacturers strategy in long run. AALAP strategy helps FMCG companies to
create a long term impact against strategy adopted by spurious product
manufacturers in rural market.

REFERANCE
 Sarangapani A. Dr., A Textbook on Rural Consumer Behaviour in India-
A study on FMCGs. New Delhi: University Science Press, 2010.

 Krishnamacharyulu CSG and Lalitha Ramakrishnan, Cases in Rural

Marketing An Integrated Approach (New Delhi: Pearson Education,
2012), p. 222.

 Kashyap Pradeep and Siddhartha Raut, The Rural Marketing Book, New
Delhi: Biztantra Publication, 2010.

 Vetrivel T. and L. Manivannan, Fake Products - The Biggest Challenge

for The Marketers On Building Brand in Rural Markets with Reference to
Uthiramerur Town at Kancheepuram District, In the journal of Sadhna
College Journal for Bloomers of Research Vol. 3, No. 2, FEBRUARY
2011.

 Simi TB, Combating Counterfeit Goods Compromising Development?,

In CUTS Centre for International Trade, Economics & Environment
(CUTS CITEE), 13/2009, 2009.

 KPMG, ― Combating Counterfeiting and Grey Market -A Challenge for

Indian Corporates (PDF file), downloaded from KPMG website,
http://kpmg.de/docs/Combating_Counterfeiting_and_Grey_Market__A_
Challenge_for_Indian_corporates.pdf, accessed February, 2012.

 Federation of Indian Chambers of Commerce and Industry,

www.ficci.com, accessed February 2012.

 Census of India, http://www.censusindia.gov.in/2011-prov-

results/paper2/census2011_paper2.html, accessed February 2012.