A recent consumer survey report by Nielsen – one of the leading global provider of insights and analytics into what consumers watch and buy – says the fast-moving consumer goods (FMCG) market in rural India will hit the $100 billion mark by 2025 and that inflation and pricing will be outstripped by consumption. Four key areas of consumption – premiumisation, commoditisation, indulgence and brand acceptance – will help drive tens of billions of dollars in sales across rural India in the coming years, says the report.
Change in consumer behaviour
Speaking at Nielsen’s India Consumer 360 Conference in New Delhi, Prashant Singh, Vice President, Nielsen Delhi, said it was critical that FMCG manufacturers and retailers focused on the unique needs of the rural Indian consumer shopping basket. The change in lifestyle and shopping spending has not only been seen in the urban consumers but has reached the rural consumers’ mind too. The consumers are becoming more aware now and want a value for the money spent on purchasing. While small-sized packages are vital for entry into the market, as the purchasing power increases, rural consumers are increasingly buying larger packs at a lower cost per serving. Retailers, who cater to these changing needs by offering a portfolio of products that provide a value proposition, will be poised for growth.
Vikram Khosla, Head, Sales - Food, ITC, says, “For us, rural market is a twiggy solution. While we want to expand our rural reach because the market is there, it is a tough balance because there is an element of cost. Sending a salesman or a van to reach each and every outlet in every area is not possible because it doesn’t make economic sense. Contribution tends to decrease; packs may be premium in size, you want to move to premiumisation but because you are moving the product all across the supply chain, your levels in the contribution of products are slightly lower when you get into the rural market.”
Rural market is sustainable
A stable consumer base with high aspirations leads to higher affordability and consumption. Singh says, “There is long term sustainability in the rural growth story in India; we have also seen that the rural consumer is diverse. He is not only an intelligent customer who does not look only for price points but is also a value customer who understands what value is. Rural growth is going to be consumption driven, that is going to be food first, non-food later.”
Speaking over the challenges in the rural market, Khosla says, “There are things like inter-channel clash. This is very typical to all of us FMCG manufacturers; we have a distributer who sales a particular product in a particular set of markets, we may have a sub-stockist or stockist who sells in one of the smaller markets, which is a situation where one sells products into another’s market. These are the clashes that you have to deal with and these are the real marketer’s challenges because those are your customers with whom we have to deal on a day-to-day basis and grow business for them.”
Rural India, home to seven out of 10 Indian consumers, will be the driving force for continued and sustained growth in the future. Reaching out to rural Indian consumers today has become easier today. Consumers in rural areas are using new technologies such as mobile internet, e-shopping and television channels, which will help increase brand awareness.