S. No.

4
Rural Marketing
(For Class Circulation Only)

Colas' countryside crusade

The cola majors, Coke and Pepsi, are trying to penetrate deep into the rural
markets with innovative pricing and marketing strategies.

APART from the high-decibel price wars and the usual battle over market shares, cola
brands Coca-Cola and Pepsi have been in a quiet behind-the-scenes skirmish - to reach
the rural masses. After an almost stagnant growth in this segment for the last two years,
both Coke and Pepsi have made efforts this year to penetrate deep into the rural markets
by substantially increasing their retailer and distribution network and with innovative
pricing and marketing strategies.

While the per-capita consumption of carbonated soft drinks in rural areas is just 2.8 litres
compared to the 7.4-litre consumption nationally, the cola majors say this renewed effort
has helped step up sales in the rural markets considerably. While Pepsi says that the
contribution of the rural sales to the overall sales of the company has been in the range of
10 to15 per cent this year, Coke spokesperson's, in a recent interview to Catalyst, has
been quoted as saying that the company has increased its rural share from nine per cent
two years ago to 25 per cent this year, by penetrating as many as 40,000 villages.

However, both the companies feel that the rural markets are still largely untapped and a
lot needs to be done. Both of them feel that there is substantial scope to further increase
the contribution of the rural markets to the overall sales.

Speaking to Catalyst, on the sidelines of a seminar on rural marketing, organised by

Direcway, the global education wing of Hughes, George Kovoor, Executive Vice-
President, Traditional Trade, Pepsi Foods Ltd, says: "The major challenge which we face
in the rural markets is availability. Since soft drinks are sold in returnable glass bottles,
one cannot sell through the conventional FMCG wholesale channel to drive availability
in rural markets."

Therefore, the company, says Kovoor, has chosen a `hub and spoke' format of
distribution. "The spoke is typically closest to the retail outlets and is serviced by a hub
distributor who is supplied directly from the plant or the company's warehouse. This
format allows for large loads travelling longer distances and short loads doing short
distances, which is cost-effective."

Similarly, Coca-Cola also has a hub and spoke distribution format. "We use all possible
means of transport that range from trucks, auto rickshaws, cycle rickshaws and hand carts
to even camel carts in Rajasthan and mules in the hilly areas, to cart our products from
the nearest hub," says a Coke spokesperson.

Once available, the focus is then on getting the consumer to try the product by giving him
a reason to buy. This also means making the product available in a chilled form at the
neighborhood store, getting the pricing and packaging right.

According to the Coke spokesperson, due to the poor and erratic power supply in
villages, the company has invested in non-electric chilling equipment to ensure the
availability of chilled products to the consumers. Also he says, "We have doubled the
number of refrigerators in the market to five lakh in the last one year."

With the rural market being extremely price sensitive, the soft drink companies have to
make sure that they strike the right balance as far as pricing is concerned. "We try and
make our products affordable in terms of unit price point. We also take into consideration
the price of the `alternate beverage' options that the consumer has in these areas," says
Kovoor.

However, considering the price-sensitive nature of the consumers in these areas, it is only
the glass bottles that allow the price to be as low as Rs 5, says Kovoor.

"If the same bottle was non-returnable, the end price would have been more than double
because of the cost of the package and that is not a great price offering for the rural
consumer," he says. "However glass bottles are tougher to distribute and sell since they
have to be brought back and the outlets have to deposit glass and crates to sell our
products," he adds.

Apart from pricing, reworking the pack size was also necessary. "The introduction of 200
ml packs at highly affordable prices provided us with a strong product offering, as our
international quality products are made available at affordable prices. This has helped us
compete and increase our share and presence in this market," points out the Coke
spokesperson.
In fact, a powerful driver for both the companies in the rural markets has been the 200 ml
packs.

But attractive pricing and convenient packaging is not enough to sell the brand in these
markets. The greatest challenge is to convince the consumer the need to buy this product.
Says Kovoor, "The issue in the rural markets is not spending power. In fact, most rural
consumers have the spending power, but they have to be given a tangible reason to buy a
soft drink when they have other options to quench their thirst, such as water or a
homemade sherbet."

Therefore, while marketing the product, it is also important for these companies to do
something, which is of relevance to the consumers. In fact, Kovoor feels that operating
rural vans with Pepsi campaigns painted on them is not a very effective idea to connect
with the consumers. "We instead try to participate in various rural activities such as
melas, undertake display drives in mandi stalls, run on-pack promos and focus a lot on
price communication."

Apart from associating in the various mela and haat activities Kovoor points out that the
rural consumers relate a lot to celebrities. "Celebrities have worked out like a dream for
us," he says. A poster of Bollywood star such as Amitabh Bachchan or cricketer Sachin
Tendulkar in a mandi or a mela for instance, says Kovoor, heightens the aspirational
association of their products.

"In fact the Amitabh and Sachin campaign of Pepsi in which the two stars are engaged in
a kite fight or the Sachin campaign in which he is in the midst of a group of children is
focused on our rural audience and have done wonders for us," he says.

Simiarly, Coke's Thanda Matlab campaign as well as the Chota Coke campaign, points
out the Coke spokesperson, also targets the rural masses. "Apart from this, all our outdoor
and indoor communications are also integrated to capture the `consumer connect' that is
established through our TV ads," he says.

Therefore it's not just right pricing and packaging, but it is the ability to establish the right
connect with the consumers which helps a brand to make it big in rural India.

(Ajitha Shashidhar, Business Line, July 03, 2003)

S. No. 5
Rural Marketing
(For Class Circulation Only)

Before gamboling into issues like where the Indian rural market stands and the
opportunities for corporates to explore there... let's look at the definition of urban and
rural India. The Census defined urban India as - "All the places that fall within the
administrative limits of a municipal corporation, municipality, cantonment board etc or
have a population of at least 5,000 and have at least 75 per cent male working population
in outside the primary sector and have a population density of at least 400 per square
kilometer. Rural India, on the other hand, comprises all places that are not urban!"

Now for some facts and figures. The Indian rural market today accounts for only about
Rs 8 billion (53 per cent - FMCG sector, 59 per cent durables sale, 100 per cent
agricultural products) of the total ad pie of Rs 120 billion, thus claiming 6.6 per cent of
the total share. So clearly there seems to be a long way ahead.

Time and again marketing practitioners have waxed eloquent about the potential of the
rural market. But when one zeroes in on the companies that focus on the rural market, a
mere handful names come to mind. Hindustan Lever Limited (HLL) is top of the mind
with their successful rural marketing projects like 'Project Shakti' and 'Operation Bharat'.
The lynchpin of HLL's strategy has been to focus on penetrating the market down the line
and focusing on price point. Furthermore, activating the brand in the rural market through
activities, which are in line with the brand itself, is what sums up HLL's agenda as far as
the rural market is concerned informs MindShare Fulcrum general manager R
Gowthaman. Amul is another case in point of aggressive rural marketing. Some of the
other corporates that are slowly making headway in this area are Coca Cola India,
Colgate, Eveready Batteries, LG Electronics, Philips, BSNL, Life Insurance Corporation,
Cavin Kare, Britannia and Hero Honda to name a few.

We can safely say that until some years ago, the rural market was being given a step-
motherly treatment by many companies and advertising to rural consumers was usually a
hit and miss affair. More often than not, the agenda being to take a short-cut route by
pushing urban communication to the rural market by merely transliterating the ad copy.
Hence advertising that is rooted in urban sensitivities didn't touch the hearts and minds of
the rural consumer. While, this is definitely changing, the process is slow. The greatest
challenge for advertisers and marketers continues to be in finding the right mix that will
have a pan-Indian rural appeal. Coca Cola, with their Aamir Khan ad campaign
succeeded in providing just that.

Khaitan fans' ad on a horse cart Wheel's wall painting

Lifebuoy's wall painting in rural India

Corporates are still apprehensive to "Go Rural." A few agencies that are trying to create
awareness about the rural market and its importance are Anugrah Madison, Sampark
Marketing and Advertising Solutions Pvt Ltd, MART, Rural Relations, O&M Outreach,
Linterland and RC&M, to name a few. Also, the first four agencies mentioned above have
come together to form The Rural Network. The paramount objective of the Network is to
get clients who are looking for a national strategy in rural marketing and help them in
executing it across different regions.

Interestingly, the rural market is growing at a far greater speed than its urban counterpart.
"All the data provided by various agencies like NCAER, Francis Kanoi etc shows that
rural markets are growing faster than urban markets in certain product categories at least.
The share of FMCG products in rural markets is 53 per cent, durables boasts of 59 per
cent market share. Therefore one can claim that rural markets are growing faster than
urban markets," says Sampark Marketing and Advertising Solutions Pvt Ltd managing
director R A Patankar.

Coca-Cola India tapped the rural market in a big way when it introduced bottles priced at
Rs 5 and backed it with the Aamir Khan ads. The company, on its behalf, has also been
investing steadily to build their infrastructure to meet the growing needs of the rural
market, which reiterates the fact that this multinational has realised the potential of the
rural market is going strength to strength to tap the same.

“Yaraan da Tashan..." McCann Erickson's ads with Aamir Khan created universal
appeal for Coca Cola

Clearly the main challenge that one faces while dealing with rural marketing is the basic
understanding of the rural consumer who is very different from his urban counterpart.
Also distribution remains to be the single largest problem marketers face today when it
comes to going rural. "Reaching your product to remote locations spread over 600,000
villages and poor infrastructure - roads, telecommunication etc and lower levels of
literacy are a few hinges that come in the way of marketers to reach the rural market,"
says MART managing director Pradeep Kashyap.

Citing other challenges in rural marketing, Patankar says, "Campaigns have to be tailor
made for each product category and each of the regions where the campaign is to be
executed. Therefore a thorough knowledge of the nuances of language, dialects and
familiarity with prevailing customs in the regions that you want to work for is essential.
The other challenge is the reach and the available means of reaching out to these markets,
hence the video van is one of the very effective means of reaching out physically to the
rural consumers."

The fact of the matter remains that when compared to the Indian urban society, which is
turning into a consumerism society; the rural consumer will always remain driven by his
needs first and will therefore be cost conscious and thrifty in his spending habits.
"Decision-making is still conscious and deliberated among the rural community. But
nevertheless, the future no doubt lies in the rural markets, since the size of the rural
market is growing at a good pace. There was a time when market predictions were made
on the basis of the state of the monsoon but this trend has changed over the years; there is
a large non farming sector, which generates almost 40 per cent of the rural wealth. Hence
the growth in the rural markets will be sustained to a large extent by this class in addition
to the farmer who will always be the mainstay of the rural economy," affirms Patankar.
"Although the melting of the urban - rural divide will take a while, this is not for want of
the availability of the means but for want of the rural consumer's mindset to change;
which has its own logic, which is driven by
tradition, custom and values that are
difficult to shed," he points out.

Fulcrum's Gowthaman says, "The biggest

impending factor or deterrent on rural
monies going up is that there is a general
sense of trying to benchmark cost per
contact (CPC). The television CPC is going
to anyways be cheaper to rural CPC and
unless and until the volume - value Satellite dish antennas reach rural India
equation turns the other way round, you will not be able to spend disproportionate monies
in the rural market."

For HLL, a one rupee or a five rupee sachet or the Kutti Hamam (the small Hamam)
helps in giving the consumers a trial opportunity. While it does help in generate volume
but not in terms of values. "Till the time that volume - value equation is managed better,
the CPC is preventing anybody to look at rural at a large scale activation programme,"
reiterates Gowthaman.

Ultimately, the ball lies in the court of rural marketers. It's all about how one approaches
the market, takes up the challenge of selling products and concepts through innovative
media design and more importantly interactivity.

Anugrah Madison's chairman and managing director RV Rajan sums up, "There is better
scope for language writers who understands the rural and regional pulse better. I also see
great scope for regional specialists in the areas of rural marketing - specialists like Event
Managers, Wall painters, folk artists, audio visual production houses. In fact all those
people who have specialized knowledge of a region are bound to do well, thanks to the
demands of the rural marketers."

So the fact remains that the rural market in India has great potential, which is just waiting
to be tapped. Progress has been made in this area by some, but there seems to be a long
way for marketers to go in order to derive and reap maximum benefits.
 Typical shop in rural India stocked
with sachets, etc

In 2000, ITC took an initiative to develop direct contact with farmers who lived in
far-flung villages in Madhya Pradesh. ITC's E-choupal was the result of this
initiative.

Moreover, rural India is not so poor as it used to be a decade or so back. Things have
changed.

(Hetal, indiatelevision.com, Oct’04)

S. No. 6
Rural Marketing (For Class Circulation Only)
Consumer durables must go rural way for growth: Study

IF the next wave of growth has to come for the consumer durables industry, it will
certainly be from rural India and with the help of consumer finance, says a study on the
`Role of Consumer Finance in Rural India' conducted by Chennai-based Anugrah
Madison and Delhi-based Marketing and Research Team (MART) in the three States of
Tamil Nadu, Punjab and Uttar Pradesh.

While the consumer durables market is facing a slowdown due to saturation in the urban
market, rural consumers are ready to put their money on the counter if consumer finance
is made available and basic infrastructure requirements such as electricity and voltage are
ironed out.

Currently, rural consumers purchase their durables from the nearest towns, leading to
increased expenses due to transportation. Hence, purchase is necessarily only done during
the harvest, festive and wedding seasons — April to June and October to November in
North India and October to February in the South, believed to be months `good for
buying'.

Though penetration of durables is low in the hinterland, the study found that most of the
respondents in North India owned at least two — television and refrigerator. While 88 per
cent of the respondents had TVs, 75 per cent had refrigerators. Almost 70 per cent of the
respondents believed that the introduction of financing schemes would help them to
purchase more durables of their choice. In fact, the rural consumer's decision to buy, the
study revealed, was largely influenced by what his neighbour had purchased and
experienced regarding a product.

In the South, 77 per cent of respondents owned CTVs, 60 per cent owned mixer-grinders
and 19 per cent used pressure cookers. "Penetration of consumer durables would be
deeper in rural India if banks were ready to finance them. Banks have shown reluctance
in this sector and restrict themselves to tractors and diesel pumps. Hence, rural consumers
have to depend on private lenders, some of whom are fly by night operators, for this
activity,'' says Mr Pradeep Kashyap, Director, MART, as he reveals that the scenario is
fast changing with financial players such as the ICICI entering the fray.

Mr Kashyap feels that the potential as well as the aspiration is high in the rural areas. "On
a broad level, the ability to buy is almost the same as in the urban areas.'' He refers to
National Council for Applied Economic Research (NCAER) study that showed urban
families with ownership of at least 3 durables per family. Rural India showed one per
family. However, only one-third of rural homes in the country are electrified, hence if this
infrastructure impediment is removed, the demand could go up three times.

(Preeti Mehra, Richa Mishra, Business Line, Oct 2003)