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India Inc eyes rural markets

Nandini Lakshman | October 25, 2003

A month ago, the Rs 500 crore (Rs 5 billion) Godrej Consumer Products did something that it hadn't done before.

It introduced smaller pack sizes of some of its soaps and put them on the market for Rs 5.

A few months earlier auto major Mahindra & Mahindra intensified its direct marketing efforts in rural India. And foods and toiletries giant Hindustan Lever has just launched a green variant of Lifebuoy soap, which , it hopes will be a winner in the rural areas.

And as part of a 'consumer connect' initiative introduced recently at Philips India's electronics arm, each of its 50 top managers are touching base with at least 10 new customers a month.

And, don't be too surprised if you visit your home town or village and find that people are having their hair washed and dyed en masse.

They are only taking advantage of the live demonstrations conducted by Chennai-based CavinKare Products.

Now, all these are efforts by players to bridge the urban-rural divide.

Buoyed by the generally prevailing feel-good factor in the country over the last eight months, marketers of all hues are heading in just one direction -- the hinterland. The rural markets, they echo, are the growth engines.

What's new? Every couple of years, with saturating sales in the urban markets, Hindustan Lever reiterates its rural mantra. And like always, the rest of the noisy herd follows.

But this time around, the players appear to be abandoning their 'one size fits all' strategy.

They are taking pains to intensify their rural efforts, are re-jigging their brands to suit a different target profile and allocating funds for further penetration.

"Even as it is getting difficult and more expensive to reach out to this populace, rural markets are the flavour of the season," says the director marketing of a consumer products company.

Adds Rajesh Jejurikar, executive vice president marketing and sales at Mahindra & Mahindra, "The urban-rural divide gap is melting."

But what's driving the rural march are a whole host of factors. First, there is the general growth in the economy.

Also, the corporate news flow has been heartening. Belying expectations, the sales and profit growth of many companies has by and large been satisfactory. After more than three years, the monsoons too were good. And to cap it all, the markets are booming.

"All in all, it provides the requisite conditions for more spending, more in the rural areas as they have deferred their purchases for long," says an economist from Mumbai's Indira Gandhi Institute of Developmental Research.

Such comments are no doubt being lapped up by marketers, especially fast moving consumer goods (FMCG) and durables players, who have seen their toplines wilting.

Adds the head of an FMCG outfit, "With changing consumer habits, you have to look at opportunities to grow your business."

Just scan the opportunities. Even as 70 per cent of the country's population resides in the hinterland, the data on rural consumer buying behaviour highlights the fact that "the rural retailer influences 35 per cent of all purchase occasions".

Also, mass media reaches only 57 per cent of the rural population. So it gives marketers a chance to experiment with unconventional media for brand communication.

Then, penetration levels for many categories are almost saturated in the urban market. But if you take commodities like soaps, the rural market is not lagging behind.

For instance, soaps have a 98 per cent penetration level in the urban markets and 70 per cent in rural. That's why the players are using every trick in the book to boost per capita consumption. "That's the only way to grow," says a soap maker.

At 480 gm, the per capita consumption of soap in India is one of the lowest in the world. It is 1,750 gm in Australia, 1,060 gm in Brazil and 700 gm in Thailand.

Indian marketers are looking at ways to push higher usage. That's the logic behind Godrej's initiatives regarding its portfolio of soaps like Cinthol, Fair Glow and No.1 in the total Rs 4,500-crore (Rs 45 billion) soap market.

It claims that 35 per cent of its sales come from the rural market. Earlier, it marketed the same pack sizes and variants of its soaps nationally.

"But states like Bihar and Uttar Pradesh were not responding," says Hosi Press, executive director & president Godrej Consumer Products.

So a month ago, it decided to change the pricing and the grammage for these markets. From the earlier Rs 9 for 75 gms, the 50 gm cakes of Cinthol and Fair Glow now retail at Rs 5 while No.1 sells for Rs 4.

Press, who claims it is a bit too early to divulge results, says, "We did this to have a lower unit outlay to increase per capita consumption."

In the last two months, Philips' Rs 700-crore (Rs 7-billion) electronics arm spent Rs 12 lakh (Rs 1.2 million) to Rs 15 lakh (Rs 1.5 million) on painting walls with its products in rural India.

According to D Shivakumar, president of the division, such efforts are only a reminder medium. "Most often, advertising has nothing to do with product sales. You get your price point right and it works in that market," he says.

That's why Philips has been redesigning its range of radios for the rural market.

Says Shivakumar, "The need for entertainment is there but technology is not a big clincher. The priorities in the rural market are different. What they need are very basic products in the entertainment term."

So minus the frills, he claims that their products now retail in the rural areas for nearly half the price that it sells in an urban locale. It now plans to embark on a similar exercise for its television and DVD range.

Or look at how Mahindra is wooing the rural customer with its pick-up trucks. Earlier, its advertising was more functional, telling its target audience why the vehicle suited villagers.

Now, its national 'slice of life' aspirational advertising is beamed to the rural driver as well.

Says Jejurikar, "You cannot call him a villager. You have to provide him the relevant urban aspiration." That is what its new doublecab Bolero Camper is aiming for.

In the past, multi-utility vehicles have been used to transport produce. But to push sales, Mahindra has been selling the concept of the Camper as a family vehicle. With the market for such vehicles at 2,500 per month, Mahindra sells about 1,800-1,900 vehicles.

"We realised that a large segment in the hinterland had purchasing power and their propensity to go for such vehicles was higher," says a Mahindra manager.

"Our sales have grown by 30 per cent on the strength of concept selling,"he adds.

A changing rural customer is what made HLL launch a green Lifebuoy, say industry sources. Being a carbolic soap, the Rs 500-crore red brick offering was used mainly by males.

Lifebuoy Active Green now talks of HLL's favourite gamble -- ingredienting. Hoping to leverage the herbal fad in the country, the soap talks of natural ingredients like tulsi and neem.

In fact, this therapeutic-cosmetic positioning, is what is said to be working for the green Lifebuoy.

"HLL has finally realised that it has to have an innovative brand for the rural market," says a competitor.

And with the rural consumer becoming as discerning as his urban counterpart, the rural market is becoming that much harder to reach.

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