Rural India is on the rise.

This can be more noted through following instances:

• NGOs worked closely with government and private sector. Self-help groups transformed village

women into empowered entrepreneurs.

• Good deal of incentives were offered to small firms. SMEs were given more tax breaks.

• With the growth of IT sector, FDI increased tremendously.

• 88% of rural population lived on less than $2/day.

• Government has focused greatly on rural employment, electrification, etc. NREGS was a good

step to provide jobs to rural folks.

• Distribution chains of big FMCG companies didn’t extend beyond wholesalers located in small

towns that had a population of 100,000.

• HUL started Project Shakti in 2001 to strengthen its rural presence. It was a great success.

• ITC launched e-chaupal in 2000 to leverage on its agri-commodity business. Farmers were

benefitted.

Its Impact/Results on the Rural India

Wide reach: The project has come a long way since its inception, and is today recognized as India’s
largest Internet-based initiative, covering 1,300 choupals, linking 7,500 villages, and serving almost 1
million farmers. e-choupal has also established its presence in other states, such as Uttar Pradesh,
Andhra Pradesh, and Karnataka. ITC, which exports US$140 million worth of agricultural commodities,
sourced US$15 million worth of commodities from e-choupals in 2001.

Convenience for farmers: Web-enabled, real-time data on crop prices gives farmers an accurate picture
of the prices they can expect from ITC and from different mandis. This information enables them to
become informed decision-makers and thereby sell their produce at a price that gives them a higher
profit margin. With the participation of agricultural supplies companies in e-commerce, the farmers now
can also conveniently order agricultural inputs.

Although the prices offered by ITC are not higher than those at the mandi, the farmer chooses ITC
because the transactions are done closer to home and the practices of weighing and quality assessment
are more efficient and transparent. Farmers save on travel time and costs and incur less wastage. Their
savings have been estimated at Rs 400 to Rs 500 (US$8 to US$10) per ton of soyabeans.

Employment for villagers: The intermediaries are not removed from the value chain. Instead, their roles
are redefined to samayojaks (coordinators), who assist ITC in setting up new e-choupals by conducting
village surveys and by identifying the best sanchalaks. They manage the physical transportation of sales
made at the e-choupal, collect price data from local auctions, and maintain records. In turn, these
coordinators earn a commission on product processed.

Over the years, with initiatives like e-chaupal; farmers became more informed and empowered in India.

Opportunities and Challenges of Rural Market in India

Opportunities
1. Low penetration level of FMCG products
The rural Indian population is large and its growth rate is also high. The FMCG sector in the
urban areas is becoming quite saturated (though it will continue to dominate in the next 8 – 10
years) while the penetration in the rural areas are only about 1%. The rural areas have and will
continue to make up more than 50% (153 million) of India’s total households and accounting for
more than its current 66%contribution to total FMCG consumption.
2. Effectiveness of Communication
A rural consumer is brand loyal and understands symbols better. The rural audience has
matured enough to understand the communication developed for the urban markets, especially
with reference to FMCG products. Television has been a major effective communication system
for rural mass and, as a result, companies should identify themselves with their advertisements.
Advertisements touching the emotions of the rural folks could drive a quantum jump in sales
3. IT Penetration in Rural India
Today there are over 15 million villagers in India who are aware of the Internet and over
300,000 villagers have used it! The rural consumers spend time and money to access higher
level information. Studies have indicated that if the content has direct relevance and will result
in commercial gains, people in rural areas are willing to pay for information services.
Consumerism has altered rural buying behavior in recent years. Spending patterns of those who
spend are now adapting to face the technology bug. If television could change the language of
brand communication in rural India, affordable Web connectivity through various types of
communication hubs will surely impact the currency of Information exchange. As the electronic
ethos and IT culture moves into rural India, the possibilities of change are becoming visible
4. Rising Rural Prosperity
India is now seeing a dramatic shift towards prosperity in rural households. As per the NCEAR
study in the year 2007, there are as many ‘middle income and above’ households in the rural
areas as in the urban areas. There are twice as many ‘lower middle income’ as in the urban
areas.

Challenges
1. Rural Consumer is different
There is a vast difference in the lifestyles of the rural and urban consumers. The rural Indian
consumer is economically, socially, and psychographically different from his urban counterpart.
The kind of choices that an urban consumer makes is very different from the choices available to
their rural counterparts. The behavior of rural consumer stems from fairly simple thought
process in contrast to a much more complex one of urban counterpart.
2. Lack of market data to understand consumer behaviour
Urban Indians and those living in small towns have been the target consumers for big FMCG
companies so far. Therefore, there has hardly been any research into the consumer behavior of
the rural areas, whereas there is considerable amount of data on the urban consumers
regarding things such as - who is the influencer, who is the buyer, how do they go and buy, how
much money do they spend on their purchases, etc. On the rural front the efforts have started
only recently and will take time to come out with substantial results. So the primary challenge is
to understand the buyer and his behavior.
3. Inadequate Infrastructure and Poor Connectivity
Due to the poor infrastructure, % of villages are not accessible by regular modes of transport.
Distribution of products becomes an arduous task here. Access to villages is hampered because
of poor road, rail and telecommunications links.
4. Cyclic Income
Farmers are very much dependent on rains in India. Also, the rural economy in India is primarily
driven by crops. Hence, villagers acquire greater ability to buy FMCG goods during the periods of
harvesting.

In rural areas people don’t believe in brand they buy product on the basis of the
prices. For them buying a branded product is not a necessity always. They will buy
products if we show them the value proposition.

Following product forms may be offered to rural BOP w.r.t. the FMCG sector:
• Low cost Toothpaste (by propagating awareness about oral care and launching low-
cost toothpaste)
• Low cost Soap (just like lifebuoy) and affordable hair-care products (sachets of
shampoos & hair oil)
• Fresh Mint based on natural ingredients (may complement cigarette consumers’
profile)
• Chewing Gums (for teenagers & kids)
• Vegetable Oil (since soya is already procured on a heavy scale)
• Detergent (for the low-income and value-seeking consumers)
• Food grain (flour “aata” --- a necessity product)
• Salt (by promoting the importance of Iodine)
• Tea (fitting to regional tastes; procured from farms)
• Non-durables such as glassware, bulbs, batteries, paper products, and plastic goods
• Health foods and beverages (to leverage on farm produce; an extension of agri-
business)
• Ready-to-eat and processed food variants (staples, wafers and confectionary)
• Milk and related products (Their Hub & Spoke model of procurement already in place)
• Instant noodles and ready-to-eat products (especially targeted for school children)
• Paperboards, writing instruments (pen, pencil etc.)