Why CCI should invest in rural? What are the opportunities in rural markets for CCI?

The rural marketing looks promising because of the following reason and opportunities

The size of the rural market is much higher than the urban markets, 68.8% of the country
population reside in rural areas.
There has been significantly increased in income of rural in the past. Per Capita income for
rural has been increased and 50% of India GDP comes from rural market.
The per capita consumption of confectionary in India as low as 20 gm when compared to
world average of 3000 gm, Europe 6500 gm and USA average 9000 gm. This is more severe
in rural market of India. Hence providing a growth opportunity in Indian rural sectors.
The consumption and penetrations of chocolate is very low in rural market as compared to
urban market.
The potential expenditure of rural market is higher than urban market, Thus increase in
income & consumers spending power provide a better sale opportunity for CCI products


What are the barriers for CCI to distribution in rural markets?

In rural area, population is scattered and many area are at distant apart, also these area are
far from urban center. Therefore distribution become very difficult and its become
economic not feasible.
Density of retail shops is quite low in the villages which are having the population less than
10000, this contribute in increasing economic difficulties.
Education and literacy level of rural market is comparatively less than urban market, hence
requirement of talent cant be effective and efficient even they are cheaper.
Income of rural area is largely dependent on agriculture which is seasonal hence
consumption of chocolate would tend to be seasonal only
Insufficient information of rural consumers about their behavior and consumptions pattern
would add difficult for marketer to understand their spending patterns.


Describe confectionary market in India. How is the market different in urban and rural India?

Organized confectionary market has growth of 6% and 12 % growth in value in the past. This
is dominating by candies but growth of chocolate is high in comparison.
The reach of confectionary products has been excess to 5 mil retail outlet, most of them are
Kirana stores
Chocolates are treated as gift items
Has 75% product penetration in urban market and 10% product penetration in rural market
The driver for urban consumers is brand and rural consumers are driven by price.
Sales comes in urban market for all price but sales come from value pack in rural market
Urban market is tapped and there is competition available but rural market is untapped



Does the case have any hero (case protagonist), a dilemma or potential solutions?

Yes as per my understating, Akhilesh Gupta is the hero in this case who has worked to RTM
strategy for CCI with possible alternate solutions, also this case has potential solution as we
have worked out to be Haat best solution s per the solution analysis given below in the
case.


Identify the criteria on the basis of which evaluation and comparison of alternatives (or
potential solutions) for distribution should be made?

Option chosen and potential solution must be workable and practical
CCI business objective of building brand, enhancing the product reach, sustainability
model and increase and high revenue.
How limited resources of CCI are utilized, easy of operable model, growth with time
for high cash flow, profitability and the scalability
Less intermediaries and overhead in distribution channel and hence increased in
bottom line

Evaluate the alternatives for distribution on the basis of chosen criteria and find out
which among the available options is best for CCI.


From the case given are the data:

Retailer selling with margin 12.5 %, so billing price to the retail would be 0.875

Sub Stockist selling with margin 4.5 % on retail billing price, so billing price to the sub
stokist would be 0.835

Super Stockist selling with margin 2.0% on sun stokist billing price, so billing price to the
superstokist would be 0.81


Option-1: Super Stockist Model

A Sub Stokist is getting, average per month = 10000/-

Revenue for Sub Stokist per year = 10000*12 =120000/-

Number of chocolate candies sold by Sub Stokist per year with .0875 is the price =
120000/.875= 137142

Number of Super Stokist in year 2012= 60 ( 10 Super stokist able to add per year)
Sub Stokist = 60 * 37 = 2220

Candies sold by Sub Stokist = 137142*2220= 304457143
Company Revenue = 304457143 * .81 = 246610286 = 246 Mil
Gross Company Revenue= Company Revenue- Cost of salesperson in superstokist
= 246- (60*500000)/1000000
= 216 million

Option-2 : Hatts

As per case total haats are 43000 by end of year, considering the reach is of 10% i.e 4300

Average sales from the haats = 8800* 1 = 8800 (Assume conf share )

Total revenue of haat= 8800*4300*2*12 = 908160000

Activation cost = 13000000

Gross Revenue = 908160000-13000000 = 895160000 ( 895 mil)
Option 3 SHG
Monthly revenue earned by SHG woman = Average 1500
Billing price for CCI would be = 1247
With 10% tapping in 1
st
year, revenue would be approx 870 mil
With the above calculations I recommend Hatts to be considerable option and solution
for CCT from the best alternatives.