Long Report - Communication

Aayushi Singh [221002 - FMG22 Section A] | Advanced Communication Analysis Report
Rural Marketing
Strategies of Dabur

FORE School of Management Rural Marketing Strategies of Dabur
PAGE 1
Acknowledgement

I express my sincere gratitude to Prof. Mohit Chhabra, Department of Communication, FORE
School of Management, for his encouragement, constant support and guidance. His support has
been invaluable in completion of the project. I would also like to place on record the sincere
efforts taken by him in giving all minor details about the subject and express my heartfelt thanks
for the same.

I would like to specially thank, Dr. Anand Burman, Chairman, Dabur for taking time out of his busy
schedule to provide me first hand information about the organization and its practices. His
support has been invaluable in completion of the project.

I also thank FORE School of Management, New Delhi for providing me with an opportunity to work
on this great learning.

PAGE 2
Contents
1 Executive Summary ............................................................................... 3
2 Introduction ....................................................................................... 4
2.1 Relevance of the study ..................................................................... 4
2.2 Purpose of the study ....................................................................... 4
2.3 Objectives of the study .................................................................... 5
2.4 Methodology ................................................................................. 5
2.4.1 Primary Research ........................................................................ 5
2.4.2 Secondary Research ...................................................................... 6
3 Profitably Selling to Indias Rural Consumers ................................................. 7
3.1 Dabur in Brief ............................................................................... 7
3.2 History of Dabur ............................................................................. 7
3.3 Serving Indias Rural Supermarket ........................................................ 8
3.4 Challenges Faced in Serving the Rural Markets ....................................... 10
3.4.1 Reaching Rural Customers ............................................................ 11
3.4.2 Acquiring Rural Customers ........................................................... 12
3.4.3 Retaining Rural Customers ........................................................... 12
3.5 Daburs Strategies ........................................................................ 12
3.5.1 Barriers to Scale ....................................................................... 13
3.5.2 Strategies for Success ................................................................. 13
3.5.3 Impact ................................................................................... 14
3.6 Rural Categorization of Dabur and Analysis on Rural Performance Measures ..... 15
3.7 Daburs Enablers to Building Successful Rural Strategies ............................ 18
4 Recommendations .............................................................................. 19
4.1 Findings and Suggestions ................................................................. 19
4.2 Limitations of the Study ................................................................. 19
4.3 Further Scope of the Study .............................................................. 19
5 Bibliography ..................................................................................... 20

PAGE 3
1 Executive Summary

For many businesses, Indias rural markets hold the key to future growth. Companies that
recognize this enormous opportunity are stepping up efforts to gain a strong foothold in these
markets. Yet the high costs required to serve rural consumers make it difficult for companies to
establish a profitable presence at scale. Still, executives shouldnt be deterred by these challenges.
This report delves into the rural marketing strategies adopted by a leading FMCG company Dabur,
who has pioneered various rural initiatives and is selling predominantly to the rural masses
profitably.
It takes a fresh look at Daburs rural marketing strategies; the ways adopted to strengthen their
distribution reach; methods adopted to sharpen their marketing tools; and analyses its integrated
marketing communication methodologies. It also describes and analyses the continuous proactive
measures adopted by Dabur for optimizing their portfolio, products and channels. This report
explains how Dabur rapidly generates profits and achieves scale by reaching, acquiring and
retaining rural consumers in India through its efficient sales and distribution networks tailored to
rural Indias unique characteristics.
In pursuance to analyzing the rural marketing strategies, Daburs history is described in brief and
a secondary analysis presented of the Indian rural landscape. The challenges to enter and
establish in rural markets is also looked into with special focus on Dabur and the challenges faced
by it while attempting to scale operations. Daburs Enablers to building successful rural strategies
and evaluated on rural performance measures.
With due analysis and understanding, it was observed that Dabur adopts a multi-pronged
approach to reach rural markets, one that allows deeper penetration and helps overcome the
difficulty of finding channel partners with the appropriate capabilities and reach. It applies a laser
like focus to their expansion efforts and creates sustainable channel relationships. It has created
trust and relevance through an ecosystem of stakeholders, defined unique value proposition for
rural customers, and engaged the right set of influencers. It has devised low-cost models for after-
sales support and is continuously investing in community development to reach millions of rural
hearts.
The unique challenges and circumstances defining Indias rural markets will continue to evolve.
Thus, in the coming years, Dabur will adopt yet additional approaches to reach, acquire and retain
Indias rural consumers. They will need innovative models to harness this opportunity in ways that
protect their margins while growing revenue in the face of constant change. Speed will be
important, as will savvy formulation and execution of strategic plans.

PAGE 4
2 Introduction

Dabur is the worlds largest Ayurveda and natural healthcare company with a portfolio of over
250 Herbal/Ayurvedic products. With annual revenues in excess of US$1 billion and market
capitalization of US$4 billion, it is Indias fourth largest fast-moving consumer goods enterprise.
Daburs offerings are very popular in rural markets. Products such as Chyawanprash, Amla Hair
Oil and Hajmola Digestives were developed based on insights the company gleaned about rural
consumers.

2.1 Relevance of the study

With deep rooted interests in Rural Markets and an upbringing in the rural landscape of India, the
researcher has a strong urge to understand and serve the rural economy which is a key driver of
the nation and bring it at par with the larger Indian economy.
Dabur has been the researchers dream place to work for quite a while and a major contributor
to this desire has been its rural marketing strategies as rural sales contribute about 47 percent of
its sales in terms of consumption. Through this study the researcher has been able to increase her
knowledge about the company, its strategies to serve the rural markets and it has strengthened
her resolve to be a part of this socially responsible and leading FMCG organization.

2.2 Purpose of the study

The size of the prize in Indias rural hinterlands is growing bigger than many businesses initially
thought. More companies are expanding their base in Indias rural markets than at any other time
in historyand for good reason. For one thing, the business environment is improving, thanks to
better infrastructure and the growing number of consumers who are earning more and snapping
up products and services that support their aspirations. The confluence of these forces is changing
the rules of the game.
As the rural market opportunity becomes more attractive, companies are experimenting with
different go-to-market modelswith varied degrees of success. Despite improvements in Indias
rural business environment, many companies are still struggling to generate sustained, profitable
growth in these markets. A key challenge is how to establish effective sales and distribution
PAGE 5
networks in rural areas. Companies that master this challenge will likely set the growth
benchmarks for their industries for years to come.
Clearly, just being there is no longer enough to succeed with Indias rural consumers. More than
ever, companies now need transformational strategies to master these markets. As always, such
strategies will hinge on deep customer and market insight. But the unprecedented speed of
change in rural markets also demands unprecedented agility. As competition intensifies,
companies will have to devise compelling value propositions that not only meet rural consumers
needs but also drive robust revenue growth and profits. While many companies remain unsure
about the possibility of achieving scale and profits in these markets, a few leading companies,
whom they call Rural Masters, are showing the way forward. Rural Masters are taking a more
focused approach to compete in these markets. They have been successful in overcoming the
challenges by building mutually beneficial relationships with rural communities and channel
partners and making additional moves that go beyond traditional selling approaches.
The primary purpose hence is to study the various forms of rural marketing strategies and the
bold moves adopted by Dabur, a Rural Master and the researchers dream company, and how it
differentiates itself from its competitors.
The aforesaid organization was chosen for research as the researcher had prior knowledge about
the norms prevalent in the organization and had visited few of its places of operation earlier in
time. The researcher also had a primary respondent who helped in facilitation of the research.

2.3 Objectives of the study

i. To understand the rural landscape of India and the opportunity it offers for
business
ii. To understand the challenges faced by companies operating in the rural sector and
classify Dabur under the rural categorization
iii. To understand how Dabur is responding to rural market growth opportunities and
overcoming the sales and distribution-related challenges
iv. To evaluate and analyse Dabur on the rural performance measures
v. To identify the enablers that helped Dabur build successful rural strategies

2.4 Methodology

2.4.1 Primary Research

The researchers uncle Mr. Anand Burman, who is the Chairman of Dabur Group, was
the primary source of data collection pertaining to the field of study. The respondent
provided latest working material used for understanding and evaluating the rural
marketing strategies of Dabur, for analysis.
PAGE 6
2.4.2 Secondary Research

The secondary sources for research were
Various journals, magazines, books and research papers which highlighted the nuances
of rural markets and various rural marketing strategies adopted by organizations.
The annual report published by Dabur, its website and a report published by Accenture
on rural markets.

These sources of data both primary and secondary helped to draw detailed analysis and
effective conclusions with respect to the rural marketing strategies adopted by Dabur and in
general about best practices to be followed as a whole.

PAGE 7
3 Profitably Selling to Indias Rural Consumers

3.1 Dabur in Brief

Dabur India Ltd is one of the leading FMCG Companies in India and is also a world leader in
Ayurveda. They operate in key consumer products categories like Hair Care, Oral Care, Health
Care, Skin Care, Home Care and Foods.
The company operates through three business units, namely
i. Consumer care division (CCD)
ii. International business division (IBD), and
iii. Consumer health division (CHD)
Their CCD business is divided into four key portfolios: healthcare, personal care, home care and
foods. Their CHD business offers a range of healthcare products. Their IBD business includes
brands, such as Dabur Amla and Vatika.
The company has 19 state-of-the-art manufacturing facilities spread across the globe. Of these,
12 production facilities are located in India.
The company has a wide distribution network, wide and deep market penetration with 50 C&F
agents, more than 5000 distributors and over 3.4 million retail outlets all over India with a high
penetration in both urban and rural markets. Their products also have a huge presence in the
overseas markets and are available in over 60 countries across the globe.
Dabur's products also have a huge presence in the overseas markets and are today available in
over 60 countries across the globe. Its brands are highly popular in the Middle East, SAARC
countries, Africa, US, Europe and Russia. Dabur's overseas revenue today accounts for over 30%
of the total turnover.

3.2 History of Dabur

The story of Dabur began with a small, but visionary endeavour by Dr. S. K. Burman, a physician
tucked away in Bengal. His mission was to provide effective and affordable cure for ordinary
people in far-flung villages. With missionary zeal and fervour, Dr. Burman undertook the task of
preparing natural cures for the killer diseases of those days, like cholera, malaria and plague.
Soon the news of his medicines traveled, and he came to be known as the trusted 'Daktar' or
Doctor who came up with effective cures. And that is how his venture Dabur got its name - derived
from the Devanagri rendition of Daktar Burman.
Dr. Burman set up Dabur in 1884 to produce and dispense Ayurvedic medicines. Reaching out to
a wide mass of people who had no access to proper treatment. Dr. S. K. Burman's commitment
and ceaseless efforts resulted in the company growing from a fledgling medicine manufacturer in
a small Calcutta house, to a household name that at once evokes trust and reliability.
PAGE 8
From its humble beginnings in the bylanes of Calcutta, Dabur India Ltd has come a long way today
to become one of the biggest Indian-owned consumer goods companies with the largest herbal
and natural product portfolio in the world. Overall, Dabur has successfully transformed itself from
being a family-run business to become a professionally managed enterprise. What sets Dabur
apart from the crowd is its ability to change ahead of others and to always set new standards in
corporate governance & innovation.

3.3 Serving Indias Rural Supermarket

Indias rural markets offer tremendous opportunity for businesses -

*Source - Accenture-Masters-of-Rural-Markets-Selling-Profitably-to-Rural-Consumers
Rural markets have emerged as an important growth engine in Indias consumption story. Housing
some 70% of Indias 1.2 billion population, the hinterland can be best termed as a vast
supermarket that is ushering in a new impetus into Indias overall economic progress. Thrust on
rural development and infrastructure; an increased rural investment scenario; farm-loan waivers
and growing disposable income in the pockets of Rural Indians - are all key factors in stimulating
overall rural consumption.

PAGE 9


As demand for everyday products gains momentum in the hinterland, rural consumers are
climbing up the value chain, with the result that incremental consumption expenditure in rural
India is significantly ahead of urban India. In fact, with an increase in income and awareness levels,
consumption in rural India is converging with the larger, more affluent towns. Moreover, rural
consumers are exhibiting an increased propensity to spend on high- quality branded products that
are backed by strong values, signaling continued buoyancy in Indias consumption story.
As a leading FMCG player with a wide portfolio of brands, robust distribution network and deep-
rooted understanding of consumer behavior, Dabur India is well-positioned to penetrate the
immense rural supermarket. They are taking a fresh look at their rural marketing strategies;
strengthening their distribution reach; sharpening their marketing tools; and charting out fresh
communication plans. They intend to take continuous proactive measures for optimizing their
portfolio, products and channels. They aim to synchronise this goal with their broader aim of
connecting with the rural masses through affordable price points and relevant product offerings.
By touching the lives of Indias 800+ million rural consumers, they are activating a powerful
growth engine for the company and creating long-term sustainable value for all its stakeholders.

PAGE 10


3.4 Challenges Faced in Serving the Rural Markets

When it comes to reaching Indias rural customers, the biggest obstacles are inadequate
distribution networks, partners with limited capabilities, long payment cycles and weak marketing
channels.

PAGE 11


Accentures survey states the following findings

Rural markets account for more than 20 percent of the total revenues for more than 65
percent of the companies they surveyed.

The majority of our survey respondents rated selling and distribution efficiency as the top
imperative for profitable and sustainable growth in rural markets.

Only one fourth of rural GDP is now generated from agriculture.

The percentage increase in monthly per capita expenditure in rural markets surpassed its
urban counterparts during 2009 and 2012, indicating increased consumption in rural
markets.

About two thirds of the respondents plan to rapidly accelerate their rural market
expansion.

The challenges experienced by companies can be classified into three major categories

3.4.1 Reaching Rural Customers

Rural markets are geographically dispersed and lack adequate physical and social infrastructure.
As a result, the distribution of goods and services to and from villages is extremely difficult and
costly.

- Dabur has ushered in this area, by developing collaborative distribution model.

PAGE 12
3.4.2 Acquiring Rural Customers

Todays rural consumers are better connected and more aware of products and services than
many businesses realize. To acquire these consumers, businesses need to develop compelling
value propositions. As rural consumers become more demanding, companies must meet those
demands with skilled sales people.

Rural customers can also be skeptical about businesses and their products. Given the strong social
fabric in rural areas and the pivotal role it plays in influencing purchase decisions, companies must
find new ways to promote their products and establish credibility.

Companies must also contend with the seasonality of rural market demand and consumer
dependence on credit. Most rural incomes depend on agricultural cycles, and demand for goods
and services fluctuates accordingly. Seasonality also fosters dependency on credit, as incomes
fluctuate along with seasonal cropping patterns. Retailers, in turn, seek credit from businesses,
placing additional demands on established financial models and working capital cycles.

3.4.3 Retaining Rural Customers

With increasing rural competition and high costs to- serve, customer retention is emerging as a
major challenge. High customer acquisition costs make it imperative for companies to increase
customer retention in order to scale operations profitably. Rural markets have limited data on
consumer demographics, behaviors, preferences and perceptions, and these limitations thwart
rational sales planning. Moreover, poor connectivity prevents companies from easily acquiring
real-time and reliable sales data. That makes it difficult for them to monitor and measure key
performance indicators including the number customers lost or gained.

3.5 Daburs Strategies

Sales in rural regions are particularly important to Dabur. In fact, about 47 percent of its sales in
terms of consumption comes from rural markets with populations smaller than 50,000. Although
the company ranks third among rural players, only 31 percent of its rural sales come through
direct distributor networks. Dabur needed to increase its direct reach to boost rural market
revenue and build distribution for higher margin categories including fruit juice, oral care and
home care.
To expand its reach, Dabur launched Project Double in 2010. The projects goals were to double
rural market revenue and increase penetration of non-passive distributed categories. The
initiative targeted villages with more than 3,000 inhabitants, a market no other FMCG company
was reaching directly. To begin, Dabur focused on high-potential districts of 10 focus states,
including Uttar Pradesh and Maharashtra, which contributed 72 percent of rural FMCG potential.

PAGE 13
3.5.1 Barriers to Scale

3.5.1.1 Inadequate distribution structure:

Daburs organization and distribution structure for urban markets was inadequate for rural
distribution. The company was structured into three broad verticalshome and personal care,
healthcare and foods with a dedicated sales team for each in urban markets. For rural
distribution, the structure would dilute economies of scale, since multiple salespeople from the
company would be approaching the same rural outlet. Reaching the local levelthrough local
operators rather than service providers from outside was another challenge. Rural trade
ecosystems were so locally specific that a local distributor was necessary, even though their use
in large numbers would be costly.
3.5.1.2 Pressure to generate incremental revenues:

Indias rural landscape is dispersed, and economic potential differs significantly across that
landscape. Southern Maharashtra is quite prosperous, for example. From historical sales,
however, Dabur knew that some districts in that state would never deliver the expected return
on investment. A one-size-fits all approach for a state would never work. The company had to be
selective about areas within each state. Dabur also had to generate incremental revenue through
rural outlets, where it was already a strong player. The company had to increase village level
consumption to boost outlet sales beyond what current efforts were achieving without Project
Double. Dabur also had to recruit employees willing to work and travel in remote areas.
3.5.1.3 Limited demand for high margin categories:

Another hurdle the company faced was the need to successfully market high-margin categories
to justify the additional cost of a direct rural sales channel.
3.5.2 Strategies for Success

3.5.2.1 Prioritizing markets through GIS technologies:

Project Double was divided into two phases. Phase 1 was launched in UP and Maharashtra to
validate the sustainability of the idea. In Phase 2, Dabur focused on the remaining eight states it
had targeted and used lessons from Phase 1 to guide efforts. The initiative began by prioritizing
287 districts. Using a GIS tool, the team could select districts based on characteristics such as
presence of a bank, per capita income and population. Each month, the distribution network
received a fresh cluster of new targets, and route planning software optimized work across
geographies.
3.5.2.2 Modifying distribution structure to improve reach:

PAGE 14
To structure its distribution and avoid multiple company contacts at a single outlet, Dabur decided
to use one umbrella for all its categories and developed a two-layer distribution structure. Super-
stockists operated from a key town in a district and a feeder sub-stockiest covered smaller areas.
Super-stockists received inventory directly from Dabur and did not carry out any local distribution.
Local distribution was done by sub stockists who reached villages with populations up to 3,000.
To avoid parallel distribution, super-stockists were allowed to supply sub-stockists only through
the use of company-provided transaction software. In larger towns, stockists served retail outlets.
A rural district manager oversaw the system, managing all three categories and stock.
3.5.2.3 Recruiting local sales representatives and offering unique career paths:

To facilitate direct contact with the markets at the front end and generate incremental sales,
Dabur recruited a large number of rural sales representatives (RSRs) on thirdparty payrolls. These
executives cover villages in a 60-mile radius from their headquarters location and are responsible
for taking orders and ensuring fulfillment by stockists. Dabur created separate career paths for
RSRs to keep them motivated and provided them with guidance and training.
3.5.2.4 Using technology to great advantage:

To monitor its huge work forces, Dabur uses mobile app technology. RSRs are supplied with an
inexpensive tablet that tracks activity on a daily basis. The variable pay structure is dependent on
RSRs giving updates. The tablets also provide information on van routes, work schedules and
order status. The apps also offer access to sales history and inventory at the sub-stockist level.
3.5.2.5 Incubating demand:

To generate sales for categories with less penetration, Dabur needed to increase village demand.
After conducting customer insight research, the company discovered that rural customers wanted
quality-value messages that stress functionality. The messages needed to address benefits, solve
issues and, most important, involve people. Symbols, colors and logos were the most common
form of brand identification. Dabur piloted rural customer connection programs across haats and
melas to provide consumers with the opportunity to experience Dabur products first hand. The
company also turned to opinion leaders, such as healthcare workers, to generate awareness and
increase the penetration in categories such as Chywanprash and baby oil. In addition, Dabur
offered mobile health camps that provided medical examinations and advice.
3.5.3 Impact

Within a year and a half, Project Double reached 24,000 of the targeted 33,000 villages with
populations of more than 3,000 in the top 10 states. In a mature state such as Maharashtra, the
program has garnered 100 percent coverage in villages with more than 3,000 residents and has
made inroads into villages with less than 3,000 in high-potential districts. In the current year, the
rural business for Maharashtra is growing at a rate more than 50 percent higher than urban
PAGE 15
markets and has been outperforming urban markets for three consecutive years. Expanding
coverage in villages with 3,000-plus residents has driven fast-paced growth. Rural growth indexed
to urban growth was 135 versus 100. Planned sales revenue has more than doubled, and gross
margins have improved through a significantly better product mix.

3.6 Rural Categorization of Dabur and Analysis on Rural
Performance Measures

The rural performance measures are
Rural Performance Indexthe degree to which rural markets are strategically important
to a companys growth agenda, defined by the contribution of rural markets to the
enterprises top and bottom lines. For any rural business initiative to qualify as being
successful, it must pass the litmus test of being incremental, profitable, material,
sustainable as well as scalable.
o Dabur is high on rural performance index as rural markets contribute to majority
of its sales and growth.

Rural Innovation Index the level of innovation in a companys product, packaging,
pricing, channels and operating models.
o Dabur is high on rural innovation index as it has developed and pioneered many
innovative ways and methods to serve the rural markets.


PAGE 16
Dabur is a Rural Master being high on both the performance measures. It is profitable and has a
significant rural market share. It excels at execution, and applies rigor to governance and control
to make sure its strategies translate into required actions. It has developed novel strategies to
serve rural consumers and draw on an intimate understanding of consumers cultures and needs
to enter rural markets. It has well-conceived expansion strategies to support them with significant
capital and resources. The individual components of its operating model is simple, it is the
discovery and collective synchronization of different elements that differentiates Dabur from its
peers.

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Daburs Strategy: Approach for Reaching Rural Customers
PAGE 17

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Daburs Strategy: Approach for Acquiring Rural Customers

Daburs Strategy: Approach for Retaining Rural Customers

PAGE 18

To engage channel partners Dabur rewards the channel partners with recognition awards from
the top management of the company, gives monetary rewards and incentives, runs specific
programmes to improve the channel performance and productivity, encourages the channel
partners by rewarding them at the local panchayat/community meetings, and also provides
financial support to upgrade channel partners.

For marketing and communicating products and services to rural markets, Dabur uses a mix of
printing marketing material and product labels in local languages, by participating in rural haats
and melas, uses TV and radio also as a means of advertising, mobile vans as a means of public
announcements, by painting walls in villages with advertisements, through influencers like
sarpanch etc., creating or seeding demand for the product/service by education and awareness
programs, and through experiential marketing etc.

3.7 Daburs Enablers to Building Successful Rural Strategies

To reach, acquire and retain rural customers, Dabur invested in the right set of enablers at the
outset. They are namely
Adapting organizational structures and secure leadership buy-in by having separate
rural division to ensure sharp focus on rural markets and by developing and defining roles
of stakeholders clearly to foster collaboration and avoid conflicts.
Creating a winning talent management strategy by leveraging local talent etc.
Using technology to create advantage - in planning, monitoring and controlling rural
operations to improve efficiency, optimize costs and increase customer loyalty.

PAGE 19
4 Recommendations

4.1 Findings and Suggestions

The current system of Dabur, its strategies are well in place with key focus on rural
markets. However, it should not focus on all brands and select a few rural players across
categories and devise a communication plan accordingly.
There is a possibility of reaching out to new unexplored rural areas and further improve
operational efficiencies by leveraging technology.
It can be the preferred company to meet the health and personal grooming needs of rural
consumers with safe, efficacious, natural solutions by synthesizing the deep knowledge
of Ayurveda and herbs with modern science.
It can also provide rural consumers with innovative products within easy reach.

4.2 Limitations of the Study

There was a constraint in travelling to the actual rural areas of operation due to the academic
schedule. The respondent shared all the information via email and phone.

4.3 Further Scope of the Study

The study can be extended to incorporate product specific rural strategies, to analyse
the Dabur system better and make recommendations for coping up with
communication issues at rural level.

Also, other project initiatives by Dabur could be analysed along with the strategies
adopted by competitors to draw useful conclusions and recommendations.

PAGE 20
5 Bibliography

Respondent - Mr. Anand Burman, Chairman, Dabur

Website - http://www.dabur.com/
Research Report - Accenture-Masters-of-Rural-Markets-Selling-Profitably-to-Rural-
Consumers

Annual Report of Dabur 2012-13
http://www.dabur.com/en/investors1/Annual_reports/2012-13/Dabur-AR-2012-13.pdf

http://www.thehindubusinessline.com/companies/dabur-india-hindustan-unilevers-
tech-route-to-rural-markets/article4915134.ece

http://marketingofdaburr.blogspot.in/2012/06/marketing-strategy-of-dabur-india-
ltd.html

http://articles.economictimes.indiatimes.com/2012-06-16/news/32269138_1_dabur-
chyawanprash-rural-markets-george-angelo

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Long Report - Communication

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Aayushi Singh [221002 - FMG22 Section A] | Advanced Communication Analysis Report

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