Premium products get rural boost TOI Monday Dec 6, 2010 Special Report Demand for top-of-the-drawer FMCG

products is no longer restricted to urban India. The rural consumer has emerged as an important cog in the sales growth of premium offerings. Clever pricing, rising aspirations, and new marketing mantras are driving this trend. With rural consumers warming up to branded products, the urban-rural divide is fading away faster than one can imagine. There is now very little difference between the aspirations of the rural consumers and their urban counterparts. Certain growth statistics have shattered the myth that the rural consumer is content with unbranded or mass-end products alone and gives a strong indication that rural market consumption has picked up and is accelerated much faster than urban markets. This had led to their changing their consumption pattern. Dove shampoo, a premium-end product, reported a growth of over 100% in rural market during January-October 2010 over the same period last year. In fact, Dove grew faster than its mid-priced cousin, Sunsilk shampoo, which reported a growth of 14% in rural India during the same period. So it is not just mass brands like Lifebuoy, Nirma, or Wheel which have, for decades, met the needs of rural India. Take a look at the growth numbers of a beauty care products like Pond s White Beauty and the figures are mind-boggling. The brand grew 4,200% in January-October 2010 in rural markets over the same period last year. Although the analysts explain that the high growth is due to a lower base and that actual sales number would be smaller given the recent introduction of the brand, one cannot overlook the fact that there is a demand for such products and marketers can no longer underestimate the aspirations of the rural consumer. Gone are the days when the rural consumer was content with using mustard oil and plain soap. Today, he/she is seeking special branded products for daily skin and health care needs. Rural consumers across income segments are showing a marked propensity towards spending on premium high-quality products, which are backed by strong brand values, says Sunil Duggal, CEO Dabur. For instance take food products. Not only has the demand for cream biscuits gone up in rural markets, the sale of instant noodles, too, growing nearly twice as fast in the rural market compared to the urban one. What s more, one in every six rural buyer of hair dye now uses colours other than black something which would have been dubbed indulgence a decade ago. Even seemingly urbane brands in categories like deodorants and fabric softners are said to be growing much faster in rural India than urban, says a study by the Nielsen Company. Variety biscuits (creams, cookies) are growing significantly faster than glucose even in rural markets. They are taking away significant consumption from glucose biscuits, says Vinita Bali, managing director and CEO, Britannia Industries.

According to a retail audit, the share of glucose biscuits in overall market has changed from 30% to 26% in the last 18 months. Clearly, consumers are valuing superior quality and better delivery in product experience and are willing to pay a higher price for it. The trend particularly serves as a wake-up call for those marketers who still do not have a deep rural reach. It is also broad based, cutting across categories. The year-on-year rural growth of premium soap brand, Cinthol Original, during AprilSeptember was higher this year at around 28% as compared to 12.5% in the corresponding period last year. Similarly the rural growth mosquito-repellent brand Good Knight coils was almost double that its urban market growth this year. Rural consumers want brands at certain price point Lifestyles are changing across India and with economic growth and increasing awareness; the ruralurban divide is getting blurred. There is greater homogeneity and demand for high-quality products, and consumers in both rural and urban markets are aspiring to live better, eat healthy and have a better tomorrow, says Shivani Hegde, general manager (foods), Nestle India. What s fuelling this trend is a steady growth in income level in rural India. Thanks to a spurt in commodity prices, employment generation schemes and fiscal sops announced by the government, rural consumers today have more money in their pockets. Nielsen pegs the opportunity for retail spending in the next 15 years at $100 billion. At present, the rural market is worth approximately $9 billion in consumer spending in the FMCG space annually. Food categories are expected to drive the bulk of the additional $91 billion into the marketplace by 2025. And it s pricing, which is key: the average rural consumer may have become brand-conscious, but he/she continues to be value-conscious. Her aspiration levels have risen, but she wants her brands at a certain point. Companies, which continue to offer products at low-unit price points (sachets), are also graduating to other price points like Rs. 5 and Rs. 10. Hence, GCPL, whose Cinthol Soap regular was available at the lowest SKU (stock keeping unit) of Rs. 23 in Tamil Nadu, has decided to introduce a smaller SKU of Rs. 6, especially for rural markets. The plan worked for the brand. According to Tarun Arora, executive vice-president (marketing), GCPL, the rationale behind introducing this offer was that although people in smaller towns aspire for a brand, they cannot afford to buy it because of high price point. However, at Rs. 6, the product was within their reach. If we look at categories like soap, they have penetrated deep into the hinterland. But there are a number of opportunities in the hair colour and the household insecticide categories. Introduction and focus on smaller SKUs has been one of our strategies to increase our thrust in the rural market, says Arora. According to Hegde of Nestle, products may need to be adapted to meet the specific needs of different segments of consumers as affordability varies across the income pyramid. Take the case of Maggi. The two-minute-noodles is a favourite across markets and the Chotu Maggi at Rs. 5 makes the same high-quality product affordable to many more consumers, she says. Similarly,

Dabur Amla is available in a Rs. 1 sachet and Rs. 10 pack, while Dabur Red toothpaste is available in a Rs. 5 SKU. For nearly half of the largest FMCG categories, rural India now contributes more to their growth than urban India. In a bid to fan this new-found rural consumerism, fresh strategies are being formulated to connect with a more aware consumer. Dabur, which draws half of its sales from rural and semi-urban markets, has moved beyond traditional media options and entered into a direct engagement with the consumer with special initiatives like a rural beauty and talent contest with Dabur Amla hair oil. Dabur already has a strong rural footprint with a pan-India network of over 3,000 stockists and superstockists. This year, HUL, which is considered to be the pioneers in terms of developing markets in rural India, launched a rural marketing and activation initiative Khushiyon Ki Doli in UP, Andhra Pradesh, and Maharashtra through which over 14 million consumers would be contacted in over 35,000 villages. Similarly, Britannia is putting more emphasis on interaction and engagement with consumers, and on understanding them as people-not just as biscuit consumers.