rural markets(hul vs. itc)

7/23/2019 Rural Markets(HUL Vs. ITC)

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1. RURAL MARKETS

1.1 PROFILE OF RURAL MARKETS

The rise of rural markets has been the most important marketing

phenomenon of the 1990s, providing volume growth to all leading

companies. Many corporates have been trying to get a grip on rural market.

But the challenges are many how to make the product affordable, how to

penetrate villages with small populations, connectivity, communication,

language barriers, spurious brands, etc.

The reasons why companies are going rural are manifold. !igher rural

incomes driven by agricultural growth, increasing literacy rate, high

penetration of T" and other mass media have increased the propensity to

consume branded and value#added products in rural areas. Marketers and

manufacturers are increasingly aware of the burgeoning purchasing power,

vast si$e and demand base of the once neglected %ndian rural markets.

&fforts are now on to understand the attitude of rural consumers, and to

walk their walk and talk their talk. The marketing mi' of many companies is

now being tailored to rural tastes and lifestyles. The %ndian hinterland has

been transformed from a back#to#the#roots holiday destination to a business

proposition.

1.1 (rofile of )ural Markets

1.* )ural Market has +rrived

1. )ural %ncome -isposal (roection

1./ )ural Markets # Mirage or )eality

1. )ural Marketing 2hallenges and 3pportunities

1.4 +ssessing Marketing for )ural %ndia

1.5 )ural Marketing 6trategies

1.7 My "iews

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Two#thirds of the country8s consumers live in rural areas and almost *4

percent of the national income is generated there. +nd 10 consecutive good

monsoons have led to improved returns from agriculture, e'cept the

unfortunate rainfall of the present year. +griculture # The agricultural

sectoris the largest employer in %ndias economy but contributes to a

declining share of its :-( ;15< in *01/#1=. %ndia ranks secondworldwide

in farm output.

To give a boost to the rural economy, the >nion Budget for *01#14 allocated a

total of )s 59,*4 2r for rural development activities including Mahatma

:andhi ?ational )ural &mployment :uarantee +ct ;M:?)&:+=.

>ndeniably, the urban market ;metropolitan cities, tier %%, %%% cities= offers great

opportunities to organi$ed retailers but they are e'pected to saturate in the near

future. Moreover, low penetration rate in rural market facilitates most big retail

companies to enter the untapped rural market ;bottom of the pyramid=. @or

e'ample, %T2 has taken a initiative through 2houpal 6agar, -2M through

!ariyali Aisan Ba$aars, (antaloons in a " with :odre through +adhars,

T+T+ through Aisan 6ansars to name a few. These corporate retailers have

already established the farm linkages resulting in %ndian farmers making good

money, after centuries of social and economic e'ploitation. +lso, as rural areas

have been affected to a lesser degree by the current economic slowdown,

several other %ndian companies are contemplating over launching rural retail

brands. Thus, rural retailing in %ndia has a very long haul ahead.

%n all, there are more than .7 million retail outlets in rural %ndia, averaging

.7 shops per village. 3verall, the rural market has been growing at #/

percent per annum, adding more than 1 million new consumers every year,

and now accounts for close to 0 percent of the volume consumption of fast

moving consumer goods ;@M2:= in %ndia. +s a result, it is becoming an

important part of the market development strategies of all @M2:

companies, including multinational ones, as well as consumer durables

businesses and services companies as well.

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!owever, there are intrinsic problems in the way products and services are

retailed in rural %ndia therefore the organi$ed retailers have been facing a

difficult time to lure customers from traditional kirana stores, especially in the

food and grocery segment. 3ther impediments include gaps in road and

telecommunications connectivity, lack of reliable electricity and water supply,

higher overhead costs, fluctuating demand that depends on the monsoon etc.

)ural populations share several commonalities like domestic constraints,

financial hardships, difficult living conditions, lack of basic information for

making informed decisions, amongst others.

The %ndian rural retail scenario is headed for a Cuantum leap. Besides newer

names set to dot the landscape, new and emerging retail formats are driving the

diversity of the fast#changing retail backdrop. +s organi$ed retail in rural %ndia

awaits the arrival of new players, current maors like %T2 are e'panding their

retail operations by setting up more stores, offering newer product categories

and entering new states. + shift from selling agricultural#inputs will help these

stores target the non#farming segments. %t is a little known fact that *< of the

rural population is not engaged in agriculture but it earns 0< of the ruralincome. The %ndian rural retail market is the ne't growth frontier for corporate

%ndia as it offers an opportunity for a large player to build appro'imately )s.

/0,000 2r retail business spanning multiple categories by the end of *01 ;at

current prices=.

1.2 RURAL MARKET HAS ARRIVED

The @ast Moving 2onsumer :oods ;@M2:= sector in rural and semi#urban

%ndia is estimated to cross >6D *0 billion by *017 and >6D 100 billion by *0*

The rural @M2: market e'panded at a 2+:) of 1.* per cent to >6D 100

billion during *0091


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%n rural markets, durables like refrigerators as well as consumer electronic

goods are likely to witness growing demand in the coming years as the

government plans to invest significantly in rural electrification

Nu!er O" P#tential $#n%uer% in Rural Market & '2( illi#n )e#)le

$urrent S*are O" Rural Market + Ur!an Market in Retail Se,t#r-

E%tiate annual %i/e #" t*e rural arket%

T0)e #" )r#u,t $#ntri!uti#n in

Rural Market

R%.

FMCG

Consumer Durables

Agro-Inputs

Automobiles(includingTractors)

Rs. 7!"""#-Crores

Rs. $!"""#-Crores

Rs. !"""#-Crores

Rs.%"!"""#-Crores

Total )s. *,0,000E#

/

Type of :oods )ural; < = >rban ;< =

@M2: /0< 40F, %T2, 2oca#2ola, F:, Britannia, (hilips,

2olgate#(almolive etc., penetrated aggressively into the rural markets and

spent heavily in the rural areas. 6ome of them even invested money to

create separate sales and marketing teams e'clusively for rural markets.

They also appointed specialist agencies that could advise them on rural

marketing.

The Rural Maret !cenario

The rural markets offered a huge potential to the business houses because of

their enormous spread and rising consumer demands. +round the world,

over / billion people survived in rural areas that came to more than 40

percent of the total population.

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%n %ndia also, the ratio of rural to urban population was slightly higher than

the worlds ratio with 50 percent of them living in rural areas. They

domiciled in nearly 4,*5,000 villages spread over .* million sC. km. This

growing affluence along with good monsoon and the increased agriculture

output, increased the total disposable income of rural consumers to 7

percent with two#third of middle#income households being in the rural

market.

+bout /0 percent of the graduates coming out of %ndian >niversities were

from rural areas. +s they are eager to earn more and live better, their

aspirations are similar to the urban youth. %t is predicted by industry analysts

that by *01/ 1, the urban households are proected to grow by / percent

while rural households are e'pected to grow by 11 percent.

%f the rural income rose by 1


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market. This has been possible due to the penetration of cable and satellite

channels that have brought down the world at the fingertips of the common

man.

The media influenced the mindset of the rural consumer to such an e'tent

that people who had money started purchasing the products unmindful of

the costs, ust to satisfy their needs as well as their ego. But, the growth of

rural market could be attributed to many other reasons that in one way

increased the sales as well as the profits of the companies.

6ome of the important causes for the growth of rural markets are

The rise in disposable income of the rural families

The economic boom

Timely rains

)ural population involved themselves in business other than

agriculture

%ncrease white#collar obs in nearby towns

2ommerciali$ation of agriculture

6aturation of the urban markets

Media penetration in rural areas ;particularly satellite channels=

:lobali$ation

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&conomic liberali$ation

)evolution in the %nformation Technology

Jomen empowerment

%mproving infrastructure

!owever, there was a significant role of the corporate enterprises

simultaneously in the development of rural market. Their timely

intervention into the rural areas, their appropriate planning, their perception

and identification about the growth of rural markets and the use of

marketing strategies all have eCually contributed for the progress of rural

markets. &ven though corporate houses were hedged with so many problems

in the rural areas, they saw a galore of opportunities in the rural market and

converted all the pessimistic characteristics of the rural market into

affirmative attributes.

They satisfied themselves with the availability of limited infrastructure, sawa sign of prosperity rather than fear during the entry of competitors into the

rural markets, showed e'citement at the availability of satellite channels in

the rural households, visuali$ed their cash bells ringing with the increase in

purchasing power of the rural masses that came eCuivalent to their urban

counterparts.

1.' RURAL MARKETIN8 STRATE8IES

Increasing brand awareness

%n the rural families, studies indicate a slow but determined shift in the use

of categories. There is a remarkable improvement in the form of products

used. @or instance, households are upgrading from indigenous teeth#

cleaning ingredients to tooth powder and toothpastes, from traditional

mosCuito repellant to coils and mats. There is also a visible shift from local

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and unbranded products to national brands. @rom low#priced brands to

premium brands.

$MG consu#"tion

3rgani$ations like !industan Fever Ftd., ?irma 2hemical Jorks, 2olgate

(almolive, (arle foods etc have carved inroads into the heart of rural

markets. "arious categories of products have been able to spread their

tentacles deep into the rural market and achieved significant recognition in

the country households. +nd, in the process, the leading brands displaced

the regional brands, local brands and the other unbranded offerings.

2ompany !ousehold penetration

HUL

Nira $*ei,al @#rk%

$#lgate Pal#li3e

Parle F##%

77F has seen a sluggish topline

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growth over the pat two years largely because of a slowdown in demand

from rural areas. The company can be e'pected to capitali$e heavily on a

revival in farm income. %nfact, !industan Fever was one of the biggest

gainers. 3thers that could gain too include ?irma, 2olgate (almolive,

Britannia %ndustries and Tata Tea.

The other gainers could be tractor maors who have faced a sharp slump in

demand over the past two years. The decline in farm income had forced a

big slump in tractor sales. Tractors sales are almost first to be impacted by a

change in farm income.

%t is e'pected that tractor maors such as (unab Tractors and Mahindra H

Mahindra would be biggest beneficiaries of a look up in the prospects. Both

the stocks, particularly, Mahindra H Mahindra, has taken a big hit in

valuations due to the fall in sales. Both the companies are fundamentally

sound and have very good management. + surge in rural economy would

also mean more transportation needs, increased housing and larger demand

for services. 2M%& proects the growth in services at 5 per cent in the

current year.

3verall, it can be said that the worst may soon be over for the economy and

things could begin to look much better from the second half of the year.

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4. TAPPIN8 INDIAS RURAL MARKET

Introduction

Ten years ago, foreign consumer products were scarce in %ndia and only

available to the affluent. %mport restrictions prevented or severely hindered

foreign consumer goods from entrance to %ndia. Jith the economic

liberali$ation that ensued, foreign brands are now prevalent across %ndia.

Today, multinational corporations view emerging markets like %ndia as

prime opportunities for growth. )ural markets are growing twice as fast as

the urban markets. :enerally speaking, success in %ndia8s rural markets for

multinational corporations has been mediocre at best. %t is from these

struggles and failures, however, those multinational corporations seeking to

enter the rural %ndian market can learn how to do so more wisely.

)nderstand the Rural Maret

I %ntroduction I >nderstand the )ural Market I )ural %ncome

I (roducts and uses I (artnering I Buy#out

I Tackle the -istribution ?etworks I (oint of 6ale

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Jith a population already in e'cess of one billion people, %ndia has caught

the eye of multinational corporations across the globe as a place of

opportunity for e'ploring new markets. Jhile %ndia has portions of their

population that would be considered wealthy or middle class by Jestern

standards, a much greater percentage of %ndia8s population is low income.

+s a result, they spend money, live, and use products differently than the

countries where most multinational corporations originate. )ural areas, in

particular, e'emplify these differences. >nderstanding the characteristics

that make the people and the market in rural %ndia uniCue can help

corporations to enter this market with success.

Rural Inco#e

Jith an average income eCuivalent to )s. *000 per month, rural %ndians

have a very low disposable income. Most rural homes have minimal storage

space and no refrigeration. "ery few people own or have access to cars. +s

a result, rural %ndian purchasing habits tend to be of an Learn today, spend

today mentality. )ather than buying in bulk, which would mean payingmore for a large Cuantity upfront, rural %ndians tend to buy what they need

for short segments of time. These factors result in consumers buying

products locally, as well as on a daily basis.

%n addition to the fact that income levels are low, rural incomes also vary

greatly depending on the monsoons. Jhen a monsoon hits, this devastates

the livelihood of most rural consumers because they are dependent on

agricultural work for income. 2orporations are also directly affected

because this makes it difficult to predict demand.

Products and )ses

Before a company considers entering the rural market, understanding the

types of products and packages that rural %ndians typically use is crucial. @or

e'ample + company seeking to enter %ndia8s market with an oral care

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product, this would be an important fact to know and consider during both

the product and package development stages. 6imilarly, !industan Fever

Ftd. ;!>F= discovered that rural %ndians tend to use the same soap for

washing everything from hair to their bodies to clothing. Because !>F

manufactures products including various soaps and detergents, !>F product

and packaging development processes have taken this rural habit into

account by designing all#in#one soaps.

By taking into account the low disposable incomes and the uniCue product

and package needs of this market, consumer products that are designed and

packaged for this market have great potential.

Partnering

The first and best option for aligning with the %ndian industry is for the

multinational to partner with an %ndian company that is already successfully

producing and selling a similar type of product. %n doing so, the new

company can take advantage of the manufacturing facilities and distribution

networks that are already in place rather than having to start from scratch.

+s a result of %ndia8s colonial e'perience when it was controlled by Britain,

many %ndians have LPa profound mistrust of foreign brands . By creating

a partnership with an %ndian company plays down the foreign factor and

helps to dispel some of this mistrust.

!industan >niFever is a multinational corporation that has found success

with this method of aligning with industry. By partnering with local

entrepreneurs who own and manage their own plants, !industan Fever isable to manufacture their products with minimal amounts of fi'ed capital. %n

these partnerships, the entrepreneurs agree to devote their plant8s capacity to

manufacturing only !industan Fever products.

*u'+,ut

+ second alternative for aligning a new industry to enter %ndia8s rural market

is to buy out a local %ndian manufacturer. +s with partnering, buying out a

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local manufacturer gives a company the ability to capitali$e on e'isting

manufacturing facilities and distribution networks.

The disadvantage is that %ndian consumers may view this negatively. 2oca#

2ola is an e'ample of a multinational corporation that tried buying out a

local distributor. %n 199*, 2oca#2ola made its second appearance to the

%ndian market. %n an attempt to eliminate its biggest competitor, 2oca#2ola

acCuired Thumbs >p, the local market leader in cola. Jhen 2oca#2ola tried

to e'change its own brand on the regular Thumbs >p distribution network,

%ndian consumers looked unfavorably upon 2oca#2ola. The company has

been struggling ever since.

Tacle the Distribution -etwors

-istribution networks in emerging markets tend to be very uniCue and often

times disointed. %ndia is no e'ception. Before a multinational corporation

even considers entering %ndia8s rural market, it is important to first get an

understanding of the current distribution system characteristics as well as

the ways that the system is likely to change over time.

%n doing so, a company can assess whether or not accurate and timely

product distribution can be achieved without first investing in the

distribution networks. 6ome of the characteristics uniCue to rural %ndia8s

distribution networks include the modes of transportation used as well as the

point of sale. -espite the challenges of the rural %ndian distribution

environment, there have been distribution successes from multinational

corporations.

Point of !ale

The retail establishment where most rural consumers purchase their day#to#

day goods is at a kirana or street shop. These small open stalls line the

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streets and are appro'imately the si$e of a living room. 2onsumers purchase

everything from bananas to ra$ors at a kirana.

Jith over *. million kiranas throughout %ndia8s rural towns and villages,

keeping store shelves stocked is one of the main challenges to consumer

goods manufacturers. %n order to reach these local shops and establish a

brand presence in them, companies need substantial amounts of working

capital and a large committed sales force.

!uccess !tories

%n spite of all the distribution challenges, there have been several

multinational corporations that have e'perienced great successes in tackling

the distribution networks. !industan Fever has been able to build a

distribution network in %ndia that directly serves 700,000 stores and uses

wholesalers and distributors to reach another . million outlets. ?ot only

does this help !industan Fever move products from manufacturing facilities

to retail outlets, it also provides a large deterrent to potential competitors.

Thin !#all

-ue to the fact that rural %ndians have small disposable incomes and very

little storage space, one of the most popular concepts to hit the rural market

has been a sachet. 6achets are plastic pouches that contain appro'imately *0

milliliters of product.

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+n %ndian company selling a 10#milliliter sachet of "elvette shampoo first

introduced sachets to %ndia in the 19908s. Before the sachet, shampoo in

%ndia was only available in larger bottles, therefore limiting its sales success

among people with small incomes. 6achets meet the needs of the rural

consumer in several ways. 6achets are ine'pensive, they occupy a small

amount of space, and they allow consumers to e'periment with new

products that they may never have tried before.

2oca#2ola is another company that has found success by thinking small. %n

a packaging change aimed directly at the rural and lower#income markets,

2oca#2ola launched a new *00 ml bottle for the eCuivalent of 10 cents in

*001. +fter introducing the smaller si$e bottle, sales increased / percent by

the end of the first Cuarter in *00*. (ackaging in smaller units clearly helps

to increase the affordability of products for rural %ndian consumers.

isual o##unication

The rural area is a market where large portions of the population are

illiterate. 6o, when packaging consumer products for rural markets,

companies must use prominent logo symbols and logo colors to assure that

illiterate consumers will be able to recogni$e the products. Therefore,

communicating brand values through the package rather than with words

becomes essential. &motional 6urplus %dentity ;&6%= is a concept that uses

the shape, color, and content of a package to differentiate a brand in the eye

of a consumer.

By creating a bond with the consumer through the package, companies are

able to establish a relationship that encourages repeat purchases. Foud,

bright colors are typically used on packages to differentiate a product from

the others on the shelf and to create a lasting impression in a consumer8s

mind.

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+nother techniCue used by multinational corporations has been tailoring

products, including changing brand names, to give them a rural image. %n

the eyes of the consumer, branded products are associated with Cuality and

value. ?irma, the largest selling detergent in the world, found success in the

rural %ndian market by using unelaborated packaging to position their

product, as one that cleaned well yet was affordable. Jhile this techniCue is

not the most eye#catching, it allows rural %ndian consumers to e'perience

the benefits of a branded product without reCuiring elaborate or e'pensive

packaging on the part of the multinational corporation.

M0 3ie% #n ta))ing t*e rural arket%

Jith an appro'imate population of 500 million people, the rural %ndian

market is important for multinational corporations to tap. +lthough rural

%ndians need to purchase consumer goods ust as their Jestern counterparts

do, rural %ndian consumers have a different set of needs that must be met by

both package and product. 6pending time researching the rural %ndian

consumer as well as the market before diving in can help to prevent

unnecessary struggles and failures. %f the opportunity e'ists, partnering with

an e'isting %ndian company upon market entry can provide several key

advantages to a company.

>nderstanding the available distribution networks in rural %ndia is crucial to

making a successful entry into the rural %ndian market. (ackages need to be

designed to withstand more distribution abuse due to poor roads and more

primitive mode of transportation. @inally, when creating a package for rural

%ndia, small si$es allow consumers to try new products. %t also caters to the

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fact that most rural %ndians have low disposable incomes and little storage

space at home. By applying these lessons that have been learned from

multinational corporations in the past, the task of entering the rural %ndian

market should be promising.

6. HINDUSTAN UNILEVER LIMITEDHUL

/.1 (rofile of !>F

/.* !>F8s (roect 6hakti

I Jhy 6haktiQ I 6hakti# Jhere are we todayQ

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6.1 PROFILE OF HINDUSTAN LEVER LTD.

!industan >nilever Fimited ;!>F= is %ndias largest @ast Moving

2onsumer :oods 2ompany with a heritage of over 70 years in %ndia and touches

the lives of two out of three %ndians.

!>F works to create a better future every day and helps people feel good, look

good and get more out of life with brands and services that are good for them and

good for others.

Jith over brands spanning *0 distinct categories such as soaps, detergents,

shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged

foods, ice cream, and water purifiers, the 2ompany is a part of the everyday life of

millions of consumers across %ndia. %ts portfolio includes leading household

brands such as Fu', Fifebuoy, 6urf &'cel, )in, Jheel, @air H Fovely, (ond8s,

"aseline, FakmR, -ove, 2linic (lus, 6unsilk, (epsodent, 2loseup, +'e, Brooke

Bond, Bru, Anorr, Aissan, Awality Jall8s and (ureit.

The 2ompany has over 14,000 employees and has an annual turnover of %?)

0,150 crores ;financial year *01/ 1=. !>F is a subsidiary of >nilever, one of

the world8s leading suppliers of fast moving consumer goods with strong local


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roots in more than 100 countries across the globe with annual sales of S/7./

billion in *01/. >nilever has 45.*< shareholding in !>F.

!>Fs "ision

G >nilever is a uniCue company, with a proud history and a bright future. Je have

ambitious plans for sustainable growth and an intense sense of social purpose.G

!>Fs (urpose H (rinciple

3ur 2orporate (urpose states that to succeed reCuires Gthe highest standards of

corporate behaviour towards everyone we work with, the communities we touch,

and the environment on which we have an impact.G

6.2 HUL% PRO5E$T SHAKTIG

(roect 6hakti, a low cost distribution model, was rolled out in *000 by

!industan Fever Fimited ;!>F= to attack the bottom of the pyramid. True,

the company had e'perimented with mobile retailing for rural markets in the

late#1970s and (roect Bharat in the mid#1990s that focused on increasing

penetration and raising awareness.

But (roect 6hakti was introduced with an aim to

bring down distribution costs in rural markets. The

traditional distribution systems used in urban markets

were costly to replicate in smaller areas.

LJe had to create a low#cost vehicle for markets that

had a population of less than *,000, in 6hakti, !>F.

The company appointed women entrepreneurs from villages as distributors

of !>F8s range of products.

The 1#month pilot proect in +ndhra (radesh turned out to be a good

learning ground. @or instance, the company initially decided to save

distributor margins by cutting one layer of distribution the local

distributor. These savings helped in giving higher margins to the 6hakti

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entrepreneurs and retailers. 6tocks were directly sent to the 6hakti

distributor from the local 2#and#@ ;carry and forward= depots. !owever,

cutting the local distributor had its own shortcomings because they help

redistribute stocks in smaller Cuantities. To e'pect that service from a large

2#and#@ depot was difficult.

Then, local distributors also managed issues like giving credit to the small

retailer they had more information about the credit value of local retailers

or the 6hakti entrepreneurs. Jithin si' months, !>F had to reinstate the

local distributor in (roect 6hakti.

+nother learning was that most 6hakti entrepreneurs had never ventured

into business. Thus, handholding became critical. !>F invested in creating

awareness about the 6hakti woman entrepreneur. !>F offered incentives to

villagers who buy from the 6hakti representative.

I" ,#n%uer% ,ann#t l#,ate t*e S*akti #an ea%il0= it naturall0 take%

#re tie "#r *er t# e%ta!li%* t*e !u%ine%%G

!owever, 6hakti is still trying to effectively bring down distribution costs.

Manpower costs is one area where a lot could be done it forms 70 per

cent of total costs in selling to the B3(. The task is manpower intensive, as

employees are reCuired to identify and develop new B3( markets, train the

entrepreneurs and revisit e'isting markets to ensure that it has adeCuate

stocks.

!ence, !>F is e'perimenting with three#four pilot models. %t has rolled out

mobile trainers who move from village to village and perform multi#

functions from selecting entrepreneurs, training them and handholding. %t is

also e'perimenting with e'clusive trainers.

+t present, 6hakti accounts for #4 per cent of !>F8s total sales and reached a

break#even point on operational e'penses in *01/. (roect 6hakti also consists of


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public awareness programs focusing on health and hygiene, as well as an i#6hakti

initiative that allows villagers to access information through kiosks. By the end of

*005, more than /,000 6hakti entrepreneurs covered million homes in 100,000

villages in 1 %ndian states. >nilever aims to increase the number of 6hakti

entrepreneurs that they recruit, train and employ from /,000 in *010 to 5,000 in

*01.

!industan Fever has built alliances with telecom H banking companies to

increase the income of the 6hakti family with the sale of telecom prepaid

currency, sim activations and acting as a banking correspondent.

6hakti is now being adapted in other >nilever markets such as 6ri Fanka, "iet

?am and Bangladesh, and is also being considered for Fatin +merican and

+frican markets. +t the end of *005, 6ri Fanka had over ,00 entrepreneurs

covering *5,000 households in /,000 villages, and /,*0 entrepreneurs in

Bangladesh were covering /00,000 households in 7,000 villages.

(/0 !/A1TI

E)#ering @#en in Rural Inia

The obective of proect 6hakti is to create income#generating capabilities

for neglected rural women, by providing a sustainable micro enterprise

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opportunity, and to improve rural living standards through health and

hygiene awareness.

@ollowing the pioneering work carried out by grameen bank of Bangladesh,

several institutions, ?:36 and government bodies have been working

closely, for nearly five years, to establish self help groups ;6!:s= of rural

women in villages across %ndia. Their e'periments clearly indicate that

micro#credit, when carefully targeted and well administered can ease

poverty significantly.

+ key lesson learnt was that rural upliftment depended not on successful

infusion of credit, but on its guided usage for better investment

opportunities

This is where !>Fs proect 6hakti is playing a role in creating such

profitable micro enterprise opportunities for rural women.

Ri%k&"ree i,r# enter)ri%e t*at 0iel% *ig* return%

+ typical 6hakti entrepreneur conducts a steady business, which gives her

an income in e'cess of )s.*,000 per month on a sustainable basis. +s most

of these women live below the poverty line, and hail from e'tremely small

villages ;with populations of less than *000=, this earning is very significant,

and almost twice the amount of their previous household income.

@or most of these families, proect 6hakti is enabling families to live with

dignity, with real freedom from want.

%n addition to money, there is a marked change in the womans status within

the household, with a much greater say in decision#making. This results in

better health and hygiene, education of the children, especially the girl child,

and an overall betterment in living standards.

The most powerful aspect about this model is that it creates a win#win

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partnership between !>F and the consumers, some of whom will depend on

the organi$ation for their livelihood, and build a self#sustaining cycle of

growth for all.

!/A1TI3 (/&R& (& AR& T,DA0

The model was piloted in ?algonda district of +ndhra (radesh in 0 villages

in the year *000. The government of +ndhra (radesh took the pioneering

step of supporting the initiative by enabling linkages with the network of

-warka groups of rural women set up for their development and self#

employment. Most 6!: women view proect 6hakti as a powerful business

proposition and are keen participants in it. %t has since been e'tended to in

+ndhra (radesh, Aarnataka, :uarat, Madhya (radesh, >ttar (radesh,

Tamilnadu, 2hattisgarh and 3rissa.

,T/&R ATIITI&!

To improve the business skills of the rural women, e'tensive training

programmes are being held. 6uch workshops have already covered a large

number of 6hakti entrepreneurs in +ndhra (radesh, Aarnataka, :uarat,

Madhya (radesh, >ttar (radesh, Tamilnadu, 2hattisgarh and 3rissa.

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+s part of their training programme, all !>F management trainees spend

about / weeks on proect 6!+AT% in rural areas with ?:36 3) 6!:6.

+ssignments include business process consulting for growing enterprises

engaged in the manufacture of products such as spices and hosiery items.

(/0 I+!/A1TI

+ key factor that has inhibited the development of rural %ndia has been

lack of access to critical information and services. :iven

%ndia8s large geography and weak infrastructure, it is often

difficult to reach out to the rural areas.

%n order to impact both livelihood opportunities and living standards of rural

communities K%#6hakti8 # an %T#based rural information service has been

developed to provide information and services to meet rural needs in

agriculture, education, vocational training, health and hygiene.

The premise of the %#6hakti model is to provide need based demand driven

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information and services across a large variety of sectors that impact the

daily livelihood opportunities and living standards of the village community.

The %#6hakti kiosk will be operated by the 6hakti entrepreneur, which

further strengthens the relationship they have already cultivated and builds

new capacity. !>F e'pects that the information provided would improve

the productivity of the rural community and unlock economic and social

progress.

I+!/A1TI3 T/& PI4,T PR,5&T

K%#6hakti8 kiosks have been set up in 7 villages in +ndhra (radesh, and have

been functional since +ugust *00.

The kiosks offer information chiefly in the form of audio#visuals in the

following areas

!ealth and !ygiene

:overnance

&ducation

+griculture

&mployment

Fegal services

"eterinary services

The information provided in the above areas is culled from the best

available resources, taking additional care to ensure that information,

especially in areas like agriculture, is locally relevant and includes inputs

from home#grown e'perts. These e'perts are also available on reCuest, to

/0


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Rural Marketing

help provide solutions to problems raised by users through a Cuery mailing

system.

The kiosks have received a great response from the local public. -uring the

launch of these kiosks, important village members like the sarpanch,

schoolteacher and doctor are invited to help reinforce relationships with the

villagers.

The kiosks remain open from 9 a.m. to 5 p.m., si' days of the week. To

enable access to the services, users have to register themselves first and

obtain the uniCue registration number. +n id card with the registration

number is provided for use every time they visit the kiosk.

+ farmer from the village can obtain a Cuick solution to a pest problem with

his crops. (eople can also send Cueries on health and hygiene to a local

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Rural Marketing

doctor for a speedy response. "illagers can avail of discount coupons from

the kiosk for medical treatment from doctors operating in local areas.

:. INDIAN TOCA$$O $OMPAN9 IT$

:.1 THE IT$ PROFILE

%T2 is one of %ndias foremost private sector companies with a market

capitali$ation of over >6 D /0 billion and a turnover of >6 D 7 billion.

)ated among the @#rl% Ce%t Cig $#)anie%by @orbes maga$ine and

among Inia% M#%t Re%)e,te $#)anie%by Business Jorld, %T2 ranks

third in pre#ta' profit among %ndias private sector corporations. %T2 is

rated among the Jorlds Best Big 2ompanies, +sias @ab 0 and the

Jorlds Most )eputable 2ompanies by @orbes maga$ine and as %ndias

Most +dmired 2ompany in a survey conducted by @ortune %ndia maga$ine

and !ay :roup. %T2 also features as one of worlds largest sustainable value

creator in the consumer goods industry in a study by the Boston 2onsulting

.1 The %T2 (rofile

.* %T28s )ural -evelopment (hilosophy

. %T2 Tapping the )ural Battle

./ Jorking of houpal

/*


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Rural Marketing

:roup. %T2 has been listed among %ndias Most "aluable 2ompanies by

Business Today maga$ine. The 2ompany is among %ndias 10 Most

"aluable ;2ompany= Brands, according to a study conducted by Brand

@inance and published by the &conomic Times. %T2 also ranks among +sias

0 best performing companies compiled by Business Jeek.

%T2 has a diversified presence in 2igarettes, !otels, (aperboards H

6pecialty (apers, (ackaging, +gri#Business, and (ackaged @oods H

2onfectionery, %nformation Technology, Branded +pparel, :reeting 2ards,

6afety Matches and other @M2: products. Jhile %T2 is an outstanding

market leader in its traditional businesses of 2igarettes, !otels,

(aperboards, (ackaging and +gri#&'ports, it is rapidly gaining market share

even in its nascent businesses of (ackaged @oods H 2onfectionery, Branded

+pparel and :reeting 2ards.

+s one of %ndias most valuable and respected corporations, %T2 is widely

perceived to be dedicatedly nation#oriented. %T2s diversified status

originates from its corporate strategy aimed at creating multiple drivers of

growth anchored on its time#tested core competencies unmatched

distribution reach, superior brand#building capabilities, effective supply

chain management and acknowledged service skills in hoteliering.

The 2ompanys houpal initiative is enabling %ndian agriculture

significantly enhance its competitiveness by empowering %ndian farmers

through the power of the %nternet. This transformational strategy is e'pected

to progressively create for %T2 a huge rural distribution infrastructure,

significantly enhancing the 2ompanys marketing reach.

%T2 employs over *0,000 people at more than 40 locations across %ndia.

)anked among %ndias most valuable companies by the Business Today

maga$ine, %T2 continuously endeavors to enhance its wealth generating

capabilities in a globalising environment by the following corporate

strategies

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Rural Marketing

2ontinue to focus on the core businesses of 2igarettes H Tobacco, !otels,

and (ackaging H (aperboard.

&nsure that each of its businesses meets the three criteria of sustainability,

namely Market 6tanding, (rofitability and %nternal "itality. &'it from

businesses, which do not meet these criteria within an agreed time frame.

&nsure that each business is internationally competitive in the %ndian

global market.

2reate distributed leadership within the organisation by nurturing talented

and focused top management teams for each of the businesses.

6ecure the future growth of the 2ompany by creating new businesses,

which leverage the strength of its core competencies, residing in various

businesses.

:.2 IT$S RURAL DEVELOPMENT PHILOSOPH9

4&T6! P)T I-DIA $IR!T

%T2 believes that an effective growth strategy for our nation must address

the needs of rural %ndia, home to 5< of our poor. %t is imperative to ensure

that %ndias economic growth is inclusive, embracing its villages, so as to

free millions of our disadvantaged citi$ens from the indignity of poverty.

//


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Rural Marketing

%t is %T2s belief that %ndias rural transformation cannot be brought about by

the government alone. ?or can the efforts of a few enterprises make a

decisive difference. 3nly an inspired public#private partnership can

transform lives and landscapes in rural %ndia. %T2s humble endeavours have

demonstrated that it is possible to create and sustain a model that can

harmoni$e the need for shareholder value creation with making a substantial

contribution to society.

%T2 has partnered the %ndian farmer for close to a century. %T2 is now

engaged in elevating this partnership to a new paradigm by leveraging

information technology through its trail#bla$ing e#2houpal initiative.

+dditionally, %T2 is significantly widening its farmer partnerships to

embrace a host of value#adding activities creating livelihoods by helping

poor tribals make their wastelands productiveN investing in rainwater

harvesting to bring much#needed irrigation to parched dry landsN

empowering rural women by helping them evolve into entrepreneursN

enhancing livestock Cuality to significantly improve dairy productivityN

providing infrastructural support to make schools e'citing for village

children. Through these rural partnerships, %T2 touches the lives of over .

million villagers across %ndia.

F#r IT$= t*e%e are e)re%%i#n% #" a ,#itent !e0#n t*e arket. O"

a ,#n3i,ti#n t*at ,#untr0 u%t ,#e !e"#re ,#r)#rati#n. O" a true )rie

in !eing $iti/en Fir%t.

:.4 IT$ TAPPIN8 THE RURAL CATTLE

The concept of a market waiting to be tapped at the bottom of the pyramid8

has caught the imagination of business people. To grow the market,

companies should redesign products targeted at richer buyers to bring them

within the reach of poorer people in %ndia and other developing countries.

+nother way to do that is to grow the incomes of the poorer people. The two

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Rural Marketing

approaches, from the supply and the demand sides can go hand#in#hand, as

%T2 is showing in its rural marketing.

%T2 launched its houpal initiative that can change the face of the

company. %n une *000, it began e'perimenting with this %nternet#based

proect for rural %ndia. This houpal operates as %nternet#based trading,

marketing and distribution channels of goods and services across the rural

economy. The houpal model confers the power of e'pert knowledge on

even the smallest of individual farmers. %t is gradually enabling a

revolutionary model shift that is enhancing the international competitiveness

of %ndian agriculture. Jhile the proect currently services over a million

farmers through its 1,0/ kiosks in 4,000 villages, it eventually aims to

cover over one#lakh villages in the ne't five years that would include one#

si'th of %ndias villages.

The company believes that a market#led model like the houpal can

induce higher productivity and higher incomes in the rural community. %n

turn, %T2 hopes that the relationship established with the farmers will help

gain their confidence so that they can trust %T2 as a reliable supplier of

goods and services on the one hand, and as a cost#effective buyer of farm

output on the other.

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Through the houpal initiative, %T2 aims to confer the power of e'pertknowledge on even the smallest individual farmer. Thus enhancing his

competitiveness in the global market.

:.6 @ORKIN8 OF E&$HOUPAL

The *ig Picture3

%T28s %nternational Business -ivision, one of %ndia8s largest e'porters of

agricultural commodities, has conceived houpal as a more efficient

supply chain aimed at delivering value to its customers around the world on

a sustainable basis. The houpal model has been specifically designed to

begin the challenges posed by the uniCue features of %ndian agriculture,

/5

E $*#u)al 7 at a 8lan,e Agena "#r t*e net De,ae

Mile%t#ne%

2ommencement of initiative

*000

################

6tates covered 4

"illages covered 1,000houpal installations *00

&mpowered e#farmers .

million

6tates to be covered 1

"illages to be covered1,00,000

houpal to be installed

*0,000

@armers to be e#empowered

10 million


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Rural Marketing

characteri$ed by fragmented farms, weak infrastructure and the involvement

of numerous intermediaries.

The alue hain + $ar# to $actor' Gate3

Khoupal8 also unshackles the potential of %ndian farmer who has been

trapped in a vicious cycle of low risk taking ability U low investment U low

productivity U weak market orientation U low value addition U low margin U

low risk taking ability. This made him and %ndian agribusiness sector

globally uncompetitive, despite rich H abundant natural resources.

6uch a market#led business model can enhance the competitiveness of

%ndian agriculture and trigger a virtuous cycle of higher productivity, higher

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Rural Marketing

incomes, enlarged capacity for farmer risk management, larger investments

and higher Cuality and productivity.

@urther, a growth in rural incomes will also unleash the latent demand for

industrial goods so necessary for the continued growth of the %ndian

economy. This will create another virtuous cycle propelling the economy

into a higher growth traectory.

The Model in Action3

+ppreciating the imperative of intermediaries in the %ndian conte't,

Khoupal8 leverages %nformation Technology to virtually cluster all the

value chain participants, delivering the same benefits as vertical integration

does in mature agricultural economies like the >6+.

Khoupal8 makes use of the physical transmission capabilities of current

mediators aggregation, logistics, counter#party risk and bridge financing

while disintermediating them from the chain of information flow and marketsignals.

Jith a careful merge of click H mortar capabilities, village internet kiosks

managed by farmers called sanchalak themselves,

enable the agricultural community access ready

information in their local language on the weather H

market prices, disseminate knowledge on scientific farm practices H risk

management, facilitate the sale of farm inputs ;now with fi'ed knowledge=

and purchase farm produce from the farmers8 doorsteps ;decision making is

now information#based=.

)eal#time information and customi$ed knowledge provided by Khoupal8

improve the ability of farmers to take decisions and align their farm output

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Rural Marketing

with market demand and secure Cuality H productivity. The aggregation of

the demand for farm inputs from individual farmers gives them access to

high Cuality inputs from established and reputed manufacturers at fair

prices. +s a direct marketing channel, virtually linked to the Kmandi8 system

for price discovery, Khoupal8 eliminates wasteful intermediation and

multiple handling. Thereby it significantly reduces transaction costs.

Khoupal8 ensures world#class Cuality in delivering all these goods H

services through several product E service specific partnerships with the

leaders in the respective fields, in addition to %T28s own e'pertise. Jhile the

farmers benefit through enhanced farm productivity and higher farm gateprices, %T2 benefits from the lower net cost of procurement ;despite offering

better prices to the farmer= having eliminated costs in the supply chain that

do not add value.

The !tatus of &ecution3

Faunched in une *000, houpal, has already become the largest

initiative among all %nternet#based interventions in rural %ndia.

houpal services today reach out to more than . million farmers

growing a range of crops # soyabean, coffee, wheat, rice, pulses, shrimp # in

over 1,000 villages through *00 kiosks across seven states. The problems

encountered while setting up and managing these Khoupal8 are primarily

of infrastructural inadeCuacies, including power supply, telecom

connectivity and bandwidth, apart from the challenge of imparting skills to

the first time internet users in remote and inaccessible areas of rural %ndia.

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Rural Marketing

+s %ndia8s KAissan8 2ompany, %T2 has taken care to involve farmers in the

designing and management of the entire Khoupal8 initiative. The active

participation of farmers in this rural initiative has created a sense of

ownership in the proect among the farmers. They see the Khoupal8 as the

new age cooperative for all practical purposes.

This enthusiastic response from farmers has encouraged %T2 to plan for the

e'tension of the Khoupal8 initiative to altogether 1 states across %ndia

over the ne't few years. 3n the anvil are plans to channeli$e services related

to micro#credit, insurance, health and education through the same K

2houpal8 infrastructure.

%T28s trail#bla$ing answer to these problems is the houpal initiativeN the

single#largest information technology#based intervention by a corporate

entity in rural %ndia. Transforming the %ndian farmer into a progressive

knowledge#seeking citi$en. &nriching the farmer with knowledgeN moving

him to a new order of empowerment.

houpal delivers real#time information and modified knowledge to

improve the farmers decision#making ability, thereby better aligning farm

output to market demandsN securing better Cuality, productivity and

improved price discovery. The model helps total demand in the nature of an

effective producers co#operative, in the process facilitating access to higher

Cuality farm inputs at lower costs for the farmer.

The houpal initiative also creates a direct marketing channel,

eliminating wasteful intermediation and multiple handling, thus reducing

transaction costs and making logistics efficient. The houpal proect is

already benefiting over . million farmers. 3ver the ne't decade, the

2houpal network will cover over 100,000 villages, representing 1E4th of

rural %ndia, and create more than 10 million e#farmers.

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Rural Marketing

A Digital Transfor#ation3

%T2 began the silent e#evolution of rural %ndia with 6oya growers in the

villages of Madhya (radesh. @or the first time, the stereotype image of the

farmer on his bullock cart made way for the e#farmer, browsing the

2houpal website. @armers now log on to the site through %nternet kiosks in

their villages to order high Cuality agri#inputs, get information on best

farming practices, e'isting market prices for their crops at home and abroad

and the weather forecast all in the local language.

%n the very first full season of houpal operations in Madhya (radesh,

6oya farmers sold nearly 0,000 tons of their produce through the

6oyachoupal %nternet platform, which has more than doubled since then.

The result marks the beginning of a transparent and cost#effective marketing

channel. Bringing prosperity to the farmers doorstep.

4ining $ar#ers to Re#unerati8e Marets3

@armers grow wheat across several agro#climatic $ones, producing grains of

varying grades. Though these grades had the potential to meet diverse

consumer preferences, the benefit never trickled down to the farmers,

because all varieties were aggregated as one average Cuality in the mandis.

&nter %T2s houpal intervention.

The houpal site is now helping the farmers discover the best price for

their Cuality at the village itself. The site also provides farmers with

speciali$ed knowledge for customi$ing their produce to the right consumer

segments. The new storage and handling system preserves the identity of

different varieties right through the farm#gate to dinner#plate supply chain.

&ncouraging the farmers to raise their Cuality standards and attract higher

prices.

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Rural Marketing

4i8estoc de8elo"#ent ser8ices at the far#er9s doorste"3

S#,ial + Far F#re%tr0

7 at a glan,e

Agena "#r t*e net

De,ae

Milestones

$#en,eent #"

initiati3e- 1


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Rural Marketing

a desirable < has serious implications for the rural poor. @orests and

common property resources constitute as much as *0< or more of the total

income source of such households. The main plan of %T28s forestry proects

is the building of grassroots capacities to initiate a virtuous cycle of

sustainable development. %T2 provides a comprehensive package of

support and e'tension services to farmers loans, land development,

planting of saplings, plantation maintenance, and marketing and funds

management.

?. PRO5E$T SHAKTI VS E&$HOUPAL

?.1 PRO5E$T SHAKTI

I: Rural distribution3

(roect 6hakti is for the rural distribution of products of !>F it is an

activity which ease the marketing E distribution channel of the !>F

products through the )ural market. %t also generate E create awareness

among the )ural masses about the product varieties of !>F.

II: Process *ased ;$MG:3

The products here are processed in the factories and than passed to the

consumers i.e. @ast Moving 2onsumers :oods ;@M2:=.6hakti is a process

based i.e. consumers are getting the finished goods directly to consume that

to at the affordable price.

4.1 (roect 6hakti

4.* houpal

4. 6hakti vEs houpal

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Rural Marketing

III: Directl' #o8es to final consu#er3

%n 6hakti proect rural women are targeted to market !>F8s products .6o,

!>F through 6hakti (roect directly moves to the final consumers and there

is no middleman to interrupt the distribution chain and it also got the

success.

I: *eneficial to rural "o"ulation3

The proect 6hakti is very beneficial to the rural population as it creates

awareness among the rural women in their areas who knows all the %n and

3uts of her home. 6o,

%ndirectly whole rural

population is benefited.

?.2 E&$HOUPAL

I: Procure#ent ,rientation3

houpal is proected towards the farmers, as they are helped through the

information, which they get from the sanchalak of the houpal. %n this

system grains and food items are purchased by %T2 co. directly from the

farmers, as farmers are informed about all farming items like seeds,

pesticides etc. and they are suggested some productive crops etc.

II: Agro+based3

houpal is totally agro based as %T2 whole production system is based on

agricultural goods i.e. Tobacco, 2otton, Jheat, and Jood pulp etc. !ence

houpal helps to get proper Cuantity and Cuality agro raw materials to its

2ompany.

III: Mo8ing in both wa's3

houpal is the one way to create awareness among farmers by giving

them all the latest farming techniCues and all the recent agro research which


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Rural Marketing

are very useful to them .%n this way it helps the consumers i.e. farmers and

%n another way through houpal the company is purchasing the food

grains for processing their finished goods.

I: *eneficial to $ar#ers3

houpal has the dual reachness as it helps the farmers by giving them

information about the hybrid seeds and fertili$ers and farming techniCues

and also how to increase the productivity on the other hand. %t also helps

farmers by giving them information about the standard rates of food grains

among the mandis in %ndia. !ence, houpal is very beneficial to thefarmers.

?.4 SHAKTI VS E&$HOUPAL

VS

%T2 and !>F are the top shots of the %ndian @M2: industry both of them

have variety of products and are at a saturation point with their products in

urban areas now they have shifted towards the huge untapped rural area

both of them have come up with a proect to capture the rural mass land.

The proect 6hakti started by !>F and choupal by %T2. houpal and

(roect 6hakti are locked in a fascinating race to pry open %ndias rural

heartland. The real %ndia, they say, lives in the villages # 47,4 villages, to

be precise. This is where the fortunes of many of %ndias biggest

corporations are likely to be shaped. %T2s houpal and !>Fs (roect

6hakti is significant. @or the uninitiated, (roect 6hakti is !>Fs smart way

to use self#help groups to directly cater to 1 million homes every month in

villages where traditional distribution systems cannot hope to enter.

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Rural Marketing

2houpal is %T2s much#feted business model to build a trading platform

with rural %ndia that already touches million farmers.

3ver the years, !>F has defined what competitive marketing is all about.

%ts distribution system has been the envy of every other marketing

organi$ation in the country. Fever !ouse in downtown Mumbai has been

2orporate %ndias unofficial >niversity of 2&3s, making it one of the most

powerful corporate alumni networks in the country. (roect 6hakti today

covers 40,000 villages across 1* states. %t provides livelihood to 1,00

6hakti dealers, almost all of them poor women. By this year#end, it will

have another 11,00 women entrepreneurs hawking Fever products to

village folk.

The proect now contributes a little more than )s 100 crores to the Fever

topline, and is yet to break even. By the ne't year#end, !>F believes

6haktis contribution could double and the proect could achieve cash break#

even.

Then theres %T2s houpal. %ts the second largest agri products e'porter

from %ndia. Thanks to its ,00 2houpal across si' states, the company

sources agri products worth almost )s 70 crore from 1 lakh farmers. By

*010, it plans to e'tend coverage to 1.1 crore farmers across 1 lakh villages

in 1 states. But %T2 is now looking beyond mere procurement # it has

begun using its network of 2houpal and warehouses for a two#way trading

process that takes products and services to the farmers. By ne't March, it

hopes to build 0 2houpal 6agars, its large rural shopping comple'es replete

with supermarket, petrol pump, bank, healthcare and training facilities, and

more.

%n 1999, as a part of (roect Millennium, !>F invited suggestions from

employees on how it could keep growing. %deas that came in were put into

several buckets. 3ne of them was loosely termed as rural. 6omeone

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Rural Marketing

suggested looking at alternative channels such as the one used by :rameen

Bank in Bangladesh. There, the micro#credit body had boosted savings

among poor women through self#help groups ;6!:s=, and then helped them

convert those savings into micro#enterprises.

%t was an idea whose time had come. The 6!: movement had been

gathering momentum in %ndia. +t the same time, despite being the largest

consumer product marketer, !>Fs much#admired distribution machinery

was directly servicing less than a fifth of %ndias villages. This was the

fallout of uneconomical last#mile logistics. The business generated by

retailers in these half a million villages was less than that incurred by the

company to service them. That meant Fever could not reach out to nearly 75

per cent of %ndias villages, which have a population of *,000 or less.

)etailers in these villages relied on the wholesale channel # easily one of the

most cost#effective mass distribution systems. 6o products did get through,

but only fast#moving brands like Fife buoy. Jithout a direct distribution

system in place, Fever knew that only a handful of its brands would reach

rural shop shelves. 2ould a new delivery channel be developed around

6!:sQ %t was an idea no one had tried before.

%n contrast, houpal was the child of desperate brainstorming. %n 1999,

%T2 was on the verge of closing its international business division ;%B-=.

Jhile sourcing 6oya in Madhya (radesh, the %B- team used to see farmers

lug their produce in trailers to the local mandi. Then, %T2 would buy the

produce from the mandi and bring it to its processing hub. ?ot only did %T2

end up paying each intermediary at the mandi, but the farmers also got

cheated at the mandi. The insight for the houpal idea came from a need

to re#engineer this supply chain so that both the farmer and %T2 gained.

!>F outsourced almost all the groundwork to partners like Mart, a rural

marketing consultancy. They negotiated with state governments, local

micro#credit organisations, and 6!:s. %T2, on the other hand, did the

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Rural Marketing

spadework itself and decided to test its model at the large 6oya#producing

belt in Madhya (radesh.

The results, too, were remarkably different !>F ended up with a model

that followed a linear, hierarchical approach, while %T2 chose a more

unconventional and comple' format. The roles of the key participants in the

two models were sharply different. !>F entered ?algonda with a simple

plan # to sell through 6!:s. %t would train their members in selling. 6ell

them its merchandise. +nd then, the members would recoup their

investments by selling to their fellow villagers, and possibly to #/ nearby

villages. %n the first phase, it started with 100.

%T2 also went for a local representative. %t would appoint a farmer as the

sanchalak for a clutch of villages. By making a local the face of the

company, %T2 could easily build credibility. +n %nternet kiosk # with a (2, a

"6+T connection and a printer # would be set up at the sanchalak home.

&veryday, %T2 would transmit the prevailing mandi prices and the price at

which it would buy 6oya at its nearby processing hub to the sanchalak via

the %nternet. %nstead of being forced to travel all the way to the mandi for

finding out the price, the farmers now had a choice sell their produce to the

mandi or %T2, or hold till prices improved.

@armers at %T2s hub in !ardoi being briefed about insurance. ?otice the

(hilips ad # the company is riding the houpal network to sell its own

wares. 6o, at %T2, the sanchalak was the critical person who would have to

figure out what the community needed. But how was he an active

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participantQ Jell, he would not make any money disseminating all the

information. !e would make money only when there were transactions. This

ensured that the sanchalak would keep %T2 on its toes. !e would say

G>nless you deliver value in my village, % wont make any money.G

To ensure that these ideas spread from sanchalak to sanchalak, %T2

organi$ed regular community gatherings. %n contrast, !>F had no formal

mechanism for spotting ideas from ground up. %T2 was also testing the

robustness of its sourcing business by running small pilots in three different

parts of the country, in commodities as diverse as coffee, aCua and 6oya. To

make it work, the companys employees sometimes had to even beef up the

local telecom infrastructure on their own.

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Rural Marketing

The two firms had different comfort levels with uncertainty. !>F wanted to

see the proof of a concept that would be sustainable and scalable across

%ndia. 6o, for two years, the new business team at ?algonda fine#tuned the

model to reach those goals. %n contrast, the team at %T2 was willing to roll

out a model once they felt they had got 40 per cent of it right. 6o, while %T2

was going though the paces of failure and success, !>F stayed in ?algonda.

The ?algonda proects beginning was unnerving. !alf of the 100 women

who signed up Cuit in the first si' months. Most were not used to running

businesses. + former !>F employee who worked on the ?algonda pilot

remembers, the women were unwilling to sell to their fellow villagers at a

profit.

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6i' months down the line, the company sharpened its hiring strategy. +t

first, 6hakti had attracted lots of women, who were keen but couldnt

commit enough time. 6o !>F began to screen them out.

+lso, when the proect was test#launched, it was not clear if (roect 6hakti

would work as a retail distribution model or a home#to#home one.

+ccording to the former idea, each village would have *# retail outlets, so

between five villages there would be about 10#1 outlets. 3ver time, !>F

reali$ed that a combination of the two approaches would work better. 6o the

women, guided by the company representative ;called rural sales promoters,

or )6(s=, would sell both door#to#door ;at M)(= as well as to retailers ;at a

discount typically given out by distributors=. They would pocket different

margins for each different sale. The shopkeepers didnt feel threatened

because these women werent undercutting the M)(N also, the stocks would

come to their doorstep.

The company gained too. &arlier, retailers used to stock only the faster

moving items like Fifebuoy and )e'onaN now, by going home to home,

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!>F could ensure that a larger range was stocked. By the end of *00*, the

company had a model that would work in villages with a population over

1,000. Jith that knowledge, it began scaling up. By the end of this year, the

company will have *,000 6hakti dealers.

Three years ago, the company was present in 100,000 villages. By the end

of *00, it will be in another 100,000 villages. %n another five years, it will

be in another 100,000. This is perhaps the biggest increase in !>Fs

coverage in the last many decades.G

?ow, %T2 began hiring for houpal, it picked up graduates from the

agricultural colleges, knowing that they would be less likely to shun rural

%ndia. +fter Madhya (radesh, %T2 took houpal to >ttar (radesh. ?ow,

its opening 4#5 new 2houpal a day. But the process was anything but

smooth when it began.

%t is in this regard, %T2s houpal scores over !>Fs (roect 6hakti. %T2

employs both pull and push strategy. The push strategy that %T2 adopts is

the plan to introduce healthcare products to the rural market.

The pull strategy is that the farmers can get the reCuired information about

the global market at any time ;This has been facilitated by the introduction

of houpal=.

%T2 procures crops from the rural farmers besides providing market

information to the rural people so that, both the parties have a win#win

situation. Jhereas !>Fs (roect 6hakti adopted the push strategy alone by

reinventing their distribution in rural areas. %t does not seem to have any

proposal to improve the purchasing power of the rural people.

3ne of the specialties of %T2s houpal is that the middlemens role has

been redefined as the consumer friendly middlemen. %t is this person, who

e'plains the information provided by the kiosks to the rural illiterate tech

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averse farmers. Thus, %T2 has taken the advantage of trust, which the

middleman has in their traditional trading.

%T2s houpal has raised the rural peoples purchasing power to an e'tent

possible with re#intermediation of obs. This can be understood from the

following table #

$#%t In,urre !0 t*e Farer

$#%t Traiti#nal Mani E&$*#u)al

Trolley @reight 1*0 1*0

Fabour 0 ?ilMiddlemen 10 ?il

!andling Foss 0 ?il

T#tal 4'( 12(

$#%t In,urre !0 t*e Pr#,e%%#r

$#%t Traiti#nal Mani E&$*#u)al

2ommission 100 0

:unny Bags 5 5

@reight to factory 1*0 ?il

6torage /0 /0

-isbursement 2ost ?il 0

T#tal 44: 21:

%n the final reckoning, both companies have managed to create a chain that

goes all the way down to village communities. The challenge now is to

leverage this better.

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Rural Marketing

'. HUL AND IT$ FOR RURAL INDIA

AND

A% )r#%)erit0 3i%it% rural Inia= in,#e% kee) ri%ing ,#)elling

,#)anie% t# re"#,u% t*eir arketing %trategie%.

@or Cuite some time now, the lure of rural %ndia been the subect of animated

discussion in corporate suites. +nd with good reason too. Jith urban

markets getting saturated for several categories of consumer goods and with

rising rural incomes, marketing e'ecutives are fanning out and discovering

the strengths of the large rural markets as they try to enlarge their markets.

Today, the idea has grown out of its infancy and dominates discussions in

any corporate boardroom strategy session.

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Rural Marketing

+ survey by the ?ational 2ouncil for +pplied &conomic )esearch, %ndias

premier economic research entity, recently confirmed that rise in rural

incomes is keeping pace with urban incomes. @rom to 7 per cent of the

average urban income in 199/#9, the average rural income has gone up to

4 to 4/ per cent by *001#0* and touched almost 44 per cent in *00/#0.

The rural middle class is growing at 1* per cent against the 1 per cent

growth of its urban counterpart.

!igher rural incomes have meant larger markets. +lready, the rural tilt is

beginning to show. + study by the 2hennai#based @rancis Aanoi Marketing

(lanning 6ervices says that the rural market for @M2: is worth D1/./

billion, far ahead of the market for tractors and agri#inputs, which is

estimated at D10 billion.

)ural %ndia also accounts for sales of D1.5 billion for cars, scooters and

bikes and over one billion dollars of durables. %n total, that represents a

market worth a whopping D*5 billion.

!industan Fever Ftd, the D*. billion %ndian subsidiary of >nilever, the

countrys largest @M2: 2ompany, has also got on the bandwagon. %ts

(roect 6hakti uses self#help groups across the country to push Fever

products deeper into the hinterland. %ts four#pronged programme creates

income#generating capabilities for underprivileged rural womenN improves

rural Cuality of life by spreading awareness of best practices in health and

hygieneN empowers the rural community by creating access to relevant

information through community portals and it also works with ?:3s to

spread literacy.

There are currently over 1,000 6hakti entrepreneurs, most of them women,

in 41,/00 villages across 1* states. By the end of *010, 6hakti aims to have

100,000 6hakti entrepreneurs covering 00,000 of %ndia8s 4/0,000 villages,

touching the lives of over 400 million people. Jith such an emphasis on

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Rural Marketing

rural marketing, consumption patterns are changing and it signals a change

in the regulatory environment. "ertical integration of the food market from

farm to firm to fork becomes the best way to achieve efficiency and serve

the interest of every stakeholder in the chain the farmer, the processor,

the retailer and the consumer.

The idea of choupal, a rural initiative by %T2, has been termed path

breaking. %n 1999, 6 6ivakumar, head of the %T2s agri#business division,

approached %T2 chairman, Oogesh -eveshwar, for a D11,000 grant to test

an idea. 6ivakumar and his team, while sourcing 6oya in Madhya (radesh,

had watched farmers lug their produce in trailers to local daily markets,

often to sell the produce even if the price wasnt attractive.

%T2 used to buy the 6oya from intermediaries and bring it to their hubs. ?ot

only did %T2 end up paying more but also the farmers got less. 6ivakumar

felt that there was a need to re#engineer this supply chain so that both the

farmers and %T2 gained. The solution, he felt, lay in information and

communication technology.

Today, %T2s e#choupal network has reached over . million farmers and is

e'panding into 0 villages a day, making it one of rural %ndias most

ambitious hori$on#widening initiatives. Choupal is the !indi word for the

village sCuare ;normally under a tree=, where elders meet to discuss matters

of importance.

& stands for a computer with an %nternet connection and is the farmers

window to the world outside his village.

%T2 installs a computer with a "6+T %nternet connection in selected

villages. + local educated farmer called sanchalak, or conductor, operates

the computer on behalf of %T2. !e is not paid for his services but gets a

commission on all transactions. +t the e#choupal, farmers are offered

services like daily weather forecasts and price of various crops in the local

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Rural Marketing

market free of cost. They can download information about farming methods

specific to each crop and region through an arrangement with agriculture

universities. They can buy seeds, fertili$ers, pesticides and even bicycles,

tractor and insurance policies. 3ver companies currently sell their

products through the network.

Malls are also on the agenda of %T2, which has its chain of retail outlets for

its apparel line Jills Fifestyle. %t plans to set up almost *00 of them by *010

in various formats and with merchandise assortments designed for local

preferences. These malls will act as a hub for both branded and locally

produced goods, entertainment options, education, and healthcare and farm

advisories.

The malls will also generate rural employment. %T2s rural malls will be

called 2houpal 6agars an e'tension of its famed e#choupal proect. By

March *004, the company hopes to get 0 2houpal 6agars going, replete

with shopping comple'es, petrol pump, healthcare, training facilities and

more.

%T2s $eal reflects the dominant trend in corporate %ndia to enter every area

from contract farming to rural malls, seed research to medicinal plants and

food processing to fruit e'ports. There is a growing perception that such is

the scope of rural markets that what has been done so far amounts to

scratching the surface. +fter all, as they say, %ndia lives in its villages

47,4 villages, to be precise. %t appears that the fortunes of %ndias largest

corporations, and several M?2s, are about to be shaped there.

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B. S@OT ANAL9SIS

STREN8HTS- &

2heap Fabour 2ost

!uman )esources are plenty

?ot tapped by the 2orporates

+griculture# Main 3ccupation

Farge number of consumers

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Rural Marketing

Farge number of producers

-iverse agro climate conditions

@EAKNESSES- &

%nformation asymmetry

Fow literacy rate

Fow purchasing power

%nadeCuate infrastructure

Fack of %nternet 2onnectivity

!igh cost and non availability of 2redit

@ragmented land holdings

OPPORTUNITIES- &

>ntapped )esources

Technology +dvancement

&nabling rural people to participate in global market

2an generate more employment opportunities

?ear absence of rural industries

Fow cost of production

&'istence of )eference groups

THREATS- &

)ural people8s perception towards technology

%ntegration of scattered population

2loser to mother nature

2onservative society

Migration to urban areas

-ifferent languages

(oliti$ation of rural society

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Rural Marketing

T*e "uture lie% it* t*#%e ,#)anie% *# %ee t*e )##r a%

t*eir ,u%t#er%.G

lhasnagar and is developing slowly and gradually.

My main aim for having a survey in a rural area was to know about the

reasons that contribute to the improvement of economic growth and

enhancement of agricultural income so as to reduce poverty in the rural

areas.

+s % had to make a proect on the two companies i.e. !>F and %T2, %

inCuired much about their marketing strategies and their development

policies followed in that area. @or this purpose % interviewed many )etailers

and their 2ustomers to know clearly in what ways !>F and %T2 are helping

them to live a better and comfortable life.

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Rural Marketing

!>F and %T2 have made a successful approach in designing the networking

for the distribution or marketing of their products in this rural area i.e.

?eral.

?eral has Cuite a large population and hence the demand of rural market is

higher than urban markets. +s a result of this both the companies adopt

different strategies to increase their market share in the rural area. 6o there

is a huge potential which will be very profitable to both these companies. +s

from the analysis point of view % observed that at each and every stage both

!>F and %T2 try to empower rural population.

HUL AND IT$ IN NERAL

+fter the collection of information from about 0 people in ?eral, % have

classified all the information as per the / (s of Marketing i.e. (roduct, (rice,

(romotion and (eople.

PRODU$T- &

?eral being a rural area does not have a large variety of products as in the

urban markets. The people in ?eral buy any product looking after its Cuality

and price. Most of the people here do not stick to a particular brand of

product but keep on changing with the entrance of new brands and with a

price, which is suitable for them. "ery less number of people in ?eral are

brand loyal and use every product of a particular brand. + large number of

people here use the products of !>F and %T2 and consider them the best of

the products as compared to the other local brands.

@ollowing is the list of some of the products of !>F and %T2 that are

consumed by the people in ?eral

PRODU$TS OF HUL PRODU$TS OF IT$6urf 6taples like +ashirvaad +tta

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6un 6ilk 6hampoo Biscuits like 6unfeast

6oaps like Fifebuoy, Fu',

!amam, (ears

2igarettes

Ta Tea and Bru 2offee ?otebooksAwality Jalls %ce#cream 2andies like Mint#3

Toothpastes like 2lose#up,

(epsodent

Mangaldeep +garbattis

ams Fike Aissan Mangaldeep 6afety Matches

Branded 6taples Fike

+nnapurna +tta

Tomato#based products like

Aissan 6auce

PRI$E- &

The people in ?eral are price#conscious. Most of the people buy the

products that have a low price without considering its brand. !ere there are

also people who buy products considering its Cuality along with a low price.

The products of !>F and %T2 have a good volume of sale but only small

packs or sachets, as they are priced low as compared to large packs.

+s most of the products of !>F and %T2 are products of routine use, the

people in ?eral are ready to pay prices for such products because those

products fulfill the basic needs of people. Aeeping this in mind, !>F has

launched its products at a very reasonable price, which is affordable for

every consumer in the rural area.

PROMOTION- &

%n ?eral, the young and the educated are large in number and hence they are

the decision makers as they get an e'posure, attitudes and aspirations from

their counterparts in the urban areas. This helps the two companies# !>F

and %T2 to increase its sales through promotion of their products.

!>F had sent a van to show the demonstrations of its products like

detergents, which attracted a large mass of people and got a ump in the sale

of those products.

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There are many posters and wall paintings of the products of !>F and %T2

in ?eral. Fooking at them, many people buy their products at least once and

they become the regular users of that product.

The people also find many schemes offered by these two companies like

one on one free, buy two get one free, soap free with a pack of surf and

many more.

The media also influences people and they buy many products after looking

at the advertisements in television.

PEOPLE- &

SOUR$E OF

IN$OME

PER$ENTA8E OF

PEOPLE+:)%2>FT>)& /0 F and %T2 will soon be in the hearts of the people

as they are working hard in spreading their branches to each and every

rural market in %ndia.

1(. $ON$LUSION

!ere the rain gods still play havoc with one8s dreams. The dusty village path

winds past a cluster of slumbering cottages and leads one to a weekly rural

ba$aar or haats, brimming over with din, bustle and transaction. This is

where the real %ndia resides.

But things are changing fast now. Thanks to the increasing literacy level and

media e'plosion, people are becoming conscious about their lifestyles and

about their rights to live a better life. Brand consciousness is on the rise.

This, clubbed with increasing disposable income of rural households, has

made the rural consumer more demanding and choosier in his purchase

behaviour than ever before. +nd the dusky village damsel has now learned

to pine for a satin rose.

The rural %ndia offers a tremendous market potential. + mere one percent

increase in %ndia8s rural income translates to a mind#boggling )s 10,000

crores of buying power. ?early two#thirds of all middle#income households

in the country are in rural %ndia. +nd close to half of %ndia8s buying potential

lies in its villages. Thus for the

rural markets(hul vs. itc)

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