Vous êtes sur la page 1sur 6

FASTMOVINGCONSUMERGOODS(FMCG)IN RURALINDIA

case study is a puzzle that has been solved. It provides the reader an opportunity to know how exactly some individual, company or se hurdles they were facing. The descriptive case study has enough information in it that readers need to understand. The information cou like what the problem was and what thinking and analyzing process was undertaken and how they came up with the said solution? STUDYING DESCRIPTIVE CASE STUDY source of ideas about behavior opportunity for innovation method to study rare phenomena method to challenge theoretical assumptions alternative or complement to the group focus of psychology

G CONSUMER GOODS (FMCG) IN RURAL INDIA

day define rural as people living a different lifestyle as opposed to that of those who have settled in the bigger cities and towns. Rural is se who possess it are rural and those who do not, are urban.

ize rural India by certain characteristics. These are: low population numbers, low median income, poor infrastructure [roads, electricity, ons], and agrarian rather than industrial activity. Such rural areas are within the sphere of influence of neighboring cities and metros. T heir aspiration levels and their viability as markets for many FMCG companies.

talk about things like butter, potato chips, toothpastes, razors, household care products, packaged food and beverages, etc. But do we ry these things come? They are called FMCGs. FMCG is an acronym for Fast Moving Consumer Goods, which refer to things that we buy s on daily basis, the things that have high turnover and are relatively cheaper.

Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this category include all consumables (othe ses) people buy at regular intervals. The most common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products ged foodstuff, and household accessories and extends to certain electronic goods. These items are meant for daily use of frequent cons

divided into two distinct segments - the premium segment catering mostly to the urban upper middle class and the popular segment w of the premium segment, catering to mass segments in urban and rural markets. The premium segment is less price-sensitive and more

is volume driven and is characterized by low margins. The products are branded and backed by marketing, heavy advertising, slick pac ution networks. Also, raw material prices play an important role in determining the pricing of the final product.

th story started following the deregulation of Indian economy in early 1990s which saw dismantling of the 'license raj', resulting in a spu nd entry of a number of foreign brands. With relatively lesser capital and technological requirements, a number of new brands emerged the relaxed FDI conditions led to induction of many global players in the segment. Both these factors resulted in leading to rapid develo rket in India. Riding on a rapidly growing economy, increasing per-capita incomes, and rising trend of urbanization, the FMCG market in urther expand to Rs 1,80,000 crore by 2015.

trong presence of MNC players, the unorganized sector has a significant presence in this industry. Availability of key raw materials, che sence across the entire value chain has provided Indian companies with a key competitive advantage in the twenty-first century. In mo he unorganized sector is almost as big if not bigger as the organized sector. Unorganized players offer higher margins to stockiest in ord

MCG sector with a market size of USD 14.8 billion is the fourth largest sector in the economy. The FMCG market is set to double from US 8-09 to USD 30 billion in 2012. FMCG sector will witness more than 60% growth in rural and semi-urban India by 2010. Indian consume pected to reach USD 400 billion by 2010.

rban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. However, rural India accou nsumption in major FMCG categories such as personal care, fabric care and hot beverages. In urban areas, home and personal care cate n care, household care and feminine hygiene will keep growing at relatively attractive rates.

ods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas. Th al and semi-urban folks for FMCG products will be mainly responsible for the growth in this sector, as manufacturers will have to deepen n for higher sales volumes.

in this sector include HUL (Hindustan Unilever Ltd.), ITC (Indian Tobacco Company), Nestl India, GCMMF (AMUL), Dabur India, Asian ury India, Britannia Industries, Procter & Gamble (P&G) Hygiene and Health Care, Marico Industries, Nirma, Coca-Cola, Pepsi and other

alysis by ASSOCHAM, Companies like Hindustan Unilever Ltd and Dabur India originates half of their sales from rural India. While Colga rico constitutes nearly 37% respectively, however Nestle India Ltd and GSK Consumer drive 25 per cent of sales from rural India.

ike rapid urbanization, increase in demands, presence of large number of young population, etc., a large number of opportunities are a

petitiveness and Comparison with the World Markets factors make India a competitive player in FMCG sector:

he diverse agro-climatic conditions in India, there is a large raw material base suitable for food processing industries. India is the largest k, sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat and fruits & vegetables. India also produces a ash, which are required for the production of soaps and detergents. The availability of these raw materials gives India the location ad

r gives India a competitive advantage. India's labor cost is amongst the lowest in the world, after China & Indonesia. Low labor costs g low cost of production. Many MNC's have established their plants in India to outsource for domestic and export markets.

anies have their presence across the value chain of FMCG sector, right from the supply of raw materials to packaged goods in the food-p rings India a more cost competitive advantage. For example, Amul supplies milk as well as dairy products like cheese, butter, etc.

spects of FMCG in Rural India

ence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increas will boost rural incomes, hence providing better growth prospects to the FMCG companies. Better infrastructure facilities will improve the sector is also likely to benefit from growing demand in the market. Because of the low per capita consumption for almost all the produc G companies have immense possibilities for growth. And if the companies are able to change the mindset of the consumers, i.e. if they umers to branded products and offer new generation products, they would be able to generate higher growth in the near future.

d that the rural income will rise in future, boosting purchasing power in the countryside. However, the demand in urban areas would be over the long term. Also, increase in the urban population, along with increase in income levels and the availability of new categories, eas maintain their position in terms of consumption. At present, urban India accounts for 66% of total FMCG consumption, with rural Ind

r the remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, rages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing a es. Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and

L DEMAND TO SHOW 50% GROWTH IN 2012 - ASSOCHAM

lease on January 3rd 2010, The Associated Chambers of Commerce and Industry in India (ASSOCHAM) have forecasted an extremely r sector. The Press Release is detailed below: Fast Moving Consumer Goods (FMCG) will be witnessing more than 50% of growth in its Ru Segments by 2012 which in totality is projected to grow at an CAGR of 10% to carry forward its market size to over Rs.1,06,300 crore f 7,900 crore, according to an analysis carried out by the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

penchant and insatiable appetite of rural and semi-urban folks for FMCG products will mainly be responsible for this development as the s will have to deepen their concentration for higher sales volumes in such niche areas.

an population will develop a larger craze for organic products in the FMCG sector from health point of view and as their will not be a larg rganic nature in the FMCG sector, this industry will have to look for larger market size in the rural and semi-urban areas, says the Cham

nd semi-urban areas, FMCG market penetration is currently about 2% in general as against its total growth rate of about 8%. The India ts vast size and demand base offered a huge opportunity that FMCG companies cannot afford to ignore. With 150 million households, th nearly three times the urban.

lso analyzed that the FMCG products, which will attract the eyes of rural and semi-urban folks, will mainly comprise soaps, detergents, rables, toothpastes, batteries, biscuits, namkeens, mosquito repellants, refined oil, and hair oil. In the semi-urban areas which will inclu larger sizes, the Chamber estimates, a good number of malls will have been put up in the next 2-3 years which will sell large volumes o thereby increase their demand phenomenally.

ural and semi-urban demand of FMCG products will grow larger and higher, it will put a severe pressure on the margins of manufacture ause of cut-throat competition, says the Chamber analysis. The branded companies in the FMCG sector that will make killings will includ Nirma, HLL, Dabur, ITC, Godrej, Britannia, Coca-Cola, Pepsi etc.

al and semi-urban income levels coupled with massive advertisement of FMCG products in the electronic media will spread so much of a semi-urban folks towards fast moving consumer goods products so much that these will enlarge their affordability for them.

as therefore suggested that to tap the rural and semi-urban market, better infrastructure facilities like roads, better telecom connectivi per sanitation and healthcare facilities should be created.

nment has enacted policies aimed at attaining international competitiveness through lifting of the quantitative restrictions, reducing exc eign investment and food laws resulting in an environment that fosters growth. 100% export oriented units can be set up by governme reign brand names is now freely permitted.

ernment has announced a cut of 4% in excise duty to fight with the slowdown of the Economy. This announcement has a positive impac the benefit from the 4% reduction in excise duty is not likely to be uniform across FMCG categories or players. The changes in excise d ttes (ITC, Godfrey Phillips), biscuits (Britannia Industries, ITC) or ready-to-eat foods, as these products are either subject to specific du excise. Even players with manufacturing facilities located mainly in tax-free zones will also not see material excise duty savings. Only la be the key ones to bet and gain on excise cut.

t Investment (FDI) Automatic investment approval (including foreign technology agreements within specified norms), up to 100% forei I and Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food processing sector except malted food, alcoholic bev ed for small scale industries (SSI). There is a continuous growth in net FDI Inflow. There is an increase of about 150% in Net Inflow for

ccounts for more than 700 Million consumers or 70% of the Indian population and accounts for 50% of the total FMCG market. The wor approximately 400 Millions. And an average citizen in rural India has less than half of the purchasing power as compare to his urban co an untapped market and most of the FMCG Companies are taking different steps to capture rural market share. The market for FMCG pr estimated about 52%t and is projected to touch about 60% within a year. HUL is the largest player in the industry and has the widest m

eraging the Cost Advantage" and quality product & services have helped India to represent as a cost advantage over other Countries. Even the Government has offer on capital goods and raw material for 100% export oriented units. Multi National Companies outsource its product requirements from its have a cost advantage. It adds a cost advantage as well as easily available raw materials.

ctoral opportunities for Indian FMCG Sector are mentioned below:

Based Products India is the largest milk producer in the world, yet only around 15 per cent of the milk is processed. The organized liqu

ess is in its infancy and also has large long-term growth potential. Even investment opportunities exist in value-added products like des

Only about 10-12 per cent of output is processed and consumed in packaged form, thus highlighting the huge potential for ex

The oral care industry, especially toothpastes, remains under penetrated in India with penetration rates around 50%. With rise in p

mes and awareness of oral hygiene, the growth potential is huge. Lower price and smaller packs are also likely to drive potential up trad

Indian tea market is dominated by unorganized players. More than 50% of the market share is capture by unorganized players hi

potential for organized players.

KETING BY FMCG SECTOR

an market saturated, FMCG companies are now targeting the rural markets. In spite of the income imbalance between urban and rural I otential since 70% of India's population lives there. Due to the recent government measures like waiver of loans, national rural employ heme and increasing minimum support price, disposable income in rural India has been rapidly increasing. However, rural markets pres roblems. These include poor infrastructure, dispersed settlements, lack of education and a virtually non-existent medium for communic retailers cannot be present in all the centers as many of them are so small that it makes them economically unfeasible. Hindustan Unilever Limited (HUL) - Shakti

ilever Limited (HUL) to tap this market conceived of Project Shakti. This project was started in 2001 with the aim of increasing the com each as well as providing rural women with income-generating opportunities. This is a case where the social goals are helping achieve b

ent of a Shakti Entrepreneur or Shakti Amma (SA) begins with the executives of HUL identifying the uncovered village. The representati ets the panchayat and the village head and identify the woman who they believe will be suitable as a SA. After training she is asked to p vestment which is used to buy products for selling. The products are then sold door-to-door or through petty shops at home. On an aver s a 10% margin on the products she sells.

which helps support Project Shakti is the Shakti Vani program. Under this program, trained communicators visit schools and village cong

es on sanitation, good hygiene practices and women empowerment. This serves as a rural communication vehicle and helps the SA in t

vantage of the Shakti program for HUL is having more feet on the ground. Shakti Ammas are able to reach far flung areas, which were e he company to tap on its own, besides being a brand ambassador for the company. Moreover, the company has ready consumers in the s of the products besides selling them.

company has been successful in the initiative and has been scaling up, it faces problems from time to time for which it comes up with i example, a problem faced by HUL was that the SAs were more inclined to stay at home and sell rather than going from door to door si ched to direct selling. Moreover, men were not liable to go to a woman's house and buy products. The company countered this problem Here an artificial market place was created with music and promotion and the ladies were able to sell their products in a few hours with any stigma or bias.

as been the growth driver for HUL and presently about half of HUL's FMCG sales come from rural markets. The Shakti network at the en Ammas covering 100,000+ villages across 15 states reaching 3 m homes. The long term aim of the company is to have 100,000 Ammas ges and reaching 600 m people. We feel that with this initiative, HUL has been successful in maintaining its distribution reach advantage This program will help provide HUL with a growing customer base which will benefit the company for years to come. ITC - e-Choupal

al model has been specifically designed to tackle the challenges posed by the unique features of Indian agriculture, characterized by fra infrastructure and the involvement of numerous intermediaries, among others.

the imperative of intermediaries in the Indian context, 'e-Choupal' leverages Information Technology to virtually cluster all the value ch delivering the same benefits as vertical integration does in mature agricultural economies like the USA.

makes use of the physical transmission capabilities of current intermediaries - aggregation, logistics, counter-party risk and bridge financ ating them from the chain of information flow and market signals.

ous blend of click & mortar capabilities, village internet kiosks managed by farmers - called sanchalaks - themselves, enable the agricult ccess ready information in their local language on the weather & market prices, disseminate knowledge on scientific farm practices & ris , facilitate the sale of farm inputs (now with embedded knowledge) and purchase farm produce from the farmers' doorsteps (decision m

ormation and customized knowledge provided by 'e-Choupal' enhance the ability of farmers to take decisions and align their farm outpu nd and secure quality & productivity. The aggregation of the demand for farm inputs from individual farmers gives them access to high stablished and reputed manufacturers at fair prices. As a direct marketing channel, virtually linked to the 'mandi' system for price disco inates wasteful intermediation and multiple handling. Thereby it significantly reduces transaction costs.

nsures world-class quality in delivering all these goods & services through several product / service specific partnerships with the leader lds, in addition to ITC's own expertise.

mers benefit through enhanced farm productivity and higher farm gate prices, ITC benefits from the lower net cost of procurement (des to the farmer) having eliminated costs in the supply chain that do not add value.

June 2000, 'e-Choupal', has already become the largest initiative among all Internet-based interventions in rural India. As India's 'kissan n care to involve farmers in the designing and management of the entire 'e-Choupal' initiative. The active participation of farmers in this created a sense of ownership in the project among the farmers. They see the 'e-Choupal' as the new age cooperative for all practical pu

-breaking initiative - the 'Choupal Pradarshan Khet', brings the benefits of agricultural best practices to small and marginal farmers. Bac earch and knowledge, this initiative provides agri-extension services which are qualitatively superior and involves pro-active handholdin ductivity gains. The services are customized to meet local conditions, ensure timely availability of farm inputs including credit, and prov ools for capturing indigenous knowledge. This initiative, which has covered over 70,000 hectares, has a multiplier impact and reaches o

Companies leverage the deep-rooted FMCG firms' network in rural India

understanding and reaching the scattered rural markets of India, FMCG majors HUL and ITC have formed a strong rural distribution ne ese networks reach out to the billion dollar consumer market which companies from various sectors aim to connect with. Hence, compa as telecom, pharmaceuticals, banking and even cosmetics are queuing up to join forces with FMCG firms to leverage the entrenched ne

al giants Ranbaxy and Pfizer recently tied up with the FMCG Company, ITC in order to distribute their over the counter (OTC) products nters spread across 40,000 villages. The e-Choupal initiative by ITC is by far one of the most successful initiatives in empowering the ru a healthy rural network across 40,000 villages in 9 states. The initiative currently empowers 4 million farmers while the number is grow will open windows for the less equipped consumers in rural areas and provide them with better medical and healthcare products current cities and towns.

partnerships to push rural growth are on an upswing, the recent Reserve Bank of India (RBI) decision to allow "for profit" companies to ts of banks has encouraged such tie-ups.

in a step to promote financial inclusion, SBI bank has tied up with HUL. HUL's 'Shakti Ammas' network, the self-help groups that distrib oducts in remote villages with a population of 2,000 and less, will now be opening SBI bank accounts for people. The alliance will ensur t only get access to capital, but also generate savings. While multiple banks can use a company as a business correspondent, more tha the same village. Hence, the wide spread network of consumer product companies is the most effective way to gain access to scattered

n Unilever (HUL) board also recently announced its strategic alliance with Tata Teleservices for distribution of latter's telecom products mpany's distribution network in rural markets in India.

stribution network from scratch is a costly affair and hence arrangements with FMCG players are a win-win for both parties as network c ever, companies leveraging the FMCG's network will be successful only if they come up with a differential pricing mechanism, keeping in

such tie-ups will induce further consumer brand engagements giving further exposure to the rural folks and also make them aware of v services available in the market.

g per capita income, increased literacy and rapid urbanization have caused rapid growth and change in demand patterns. Apart from the

goods, convenience and luxury goods are growing at a fast pace too. The urban population between the ages of 15 to 34 years is expe ase from 107 m in 2001 to 138 m in 2011, an increase of 30% per annum. In fact by 2020 it is expected that the average age in India . This would unleash a latent demand with more money and a new mindset. With growing incomes at both the rural and the urban leve ntial is expected to expand further.

the homegrown companies are looking to expand beyond the Indian shores, the MNC subsidiaries are likely to look for greater leverag

ctive parent's strength. Since India is a big potential market, none of the big MNCs can afford to ignore the region for long. The decade to see more MNCs looking to enter India, as organized retailing picks up.

o the large size of the market, penetration level in most product categories like jams, skin care, toothpaste, hair wash etc. in India is lo

visible when a comparison is done between the rural and the urban areas. Existence of unsaturated markets provides an excellent oppo ndustry players in the form of a vastly untapped market as the income rises. Another key positive for the sector is the current governme ng India the hub of agri-processing.

G products are witnessing a retailing revolution in recent times. While some retail chains have large retail formats enabling huge volume

ed on affordability which has resulted in margins getting squeezed. The Indian market is dominated by more than 12 m small 'mom and ts. However only 4% is in the organized sector, thereby reducing the reach. With FDI expected to be allowed, the share from the retail cted to increase.