Growth of Fmcg Products in Rural Market

Certificate This is to certify that Ms. Vrushali Awachar of IBS Nagpur has submitted her report titled, “Growth of FMCG products in rural market” for the year 2009-2010 in partial fulfillment of the requirement for the completion of practical study at the first semester of MBA programme. Place: Date: _ Preface As part of course in MBA for the first semester, we have to make a report based on sector analysis; which I am presenting is on Growth of FMCG products in rural market.

This opportunity allows the students to study the real business environment and a consequent report further helps in improving on the communication and presentation aspects which are highly essential to be inculcated amongst Management students. This practical training at MBA programme develops a feeling about the difficulties and challenges in the business world. Only theory knowledge does not impart complete education. To fulfill these objectives these reports play an essential part in MBA programme.

In this direction, I have tried my level best to analyze the various information obtained and have presented in a logical and understandable format. Acknowledgement I forward gratitude to respected Dean Sir of our Institute. I am heartily thankful to the management for providing me the opportunity to make a study of practical training in their organization. I express my sincere thanks to the staff of the unit who have given us all the information and who guided us. I am also thankful to Prof. Upal Sinha and Dr.

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Sarita Modak with whose help; the study was conducted and made possible they provided full guidance, cooperation and valuable suggestion about the Report. I am thankful to my college friends and all those who have helped me directly or indirectly in the preparation of this report. With thanks… Place: Nagpur Date: 28th/08/2009 Yours Sincerely, Vrushali Awachar 09BS0000502 Contents of the Report Table of Contents Certificate Preface Acknowledgement 1. Abstract Growth of FMCG products in Rural Market P. Balakrishna 2. Introduction Sales zoomed from 35,000 sachets to 12 lakhs.

Initially they took any sachet but now they are restricted to Chik sachets. Now at present, rural market is one of the best opportunity and focusing sector for the major FMCG companies in India. Each and every company is set to invest a huge capital for competition in rural market. According to the Federation of Indian Chambers of Commerce and Industry, the number of rural households using FMCG products has grown from 136 million in 2004 to 143 million in 2007,a clear indication that rural consumers are shifting from commodities to branded products.

Urban consumers on the other hand could go slowly on FMCG expenses, thanks for inflation spiral, rise in fuel cost and costlier credit. Evidence suggest that for the first time, that the rural market has grown faster than the urban market in key product categories in April-May 2008, the latest months for which such information is available, according to market research firm NC Nielson. Market and Indian companies, in India. * To study the challenges faced by rural marketers in India. * To study the reasons of popularity of rural markets in India. 5. Need of the study To determine the demand of FMCG products in rural India.

Know about the different choice of rural consumers. Rural and Urban potential _(table 1. Rural and urban population)_ _(Source: Statistical Outline of India (2001-2002) NCAER_ According to a study by Chennai-based Francis Kanoi Marketing Planning 7. Growth Prospects With the presence of 12. 2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the FMCG companies. Better infrastructure facilities will improve their supply chain.

FMCG sector is also likely to benefit from growing demand in the market. Because of the low per capita consumption for almost all the products in the country, FMCG companies have immense possibilities for growth. And if the companies are able to change the mindset of the consumers, i. e. if they are able to take the consumers to branded products and offer new generation products, they would be able to generate higher growth in the near future. It is expected that the rural income will rise in 2007, boosting purchasing power in the countryside. However, the demand in urban areas would be the key growth driver over the long term.

Also, increase in the urban population, along with increase in income levels and the availability of new categories, would help the urban areas maintain their position in terms of consumption. At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates.

Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas. Indian Competitiveness and Comparison with the World Markets The following factors make India a competitive player in FMCG sector: Availability of raw materials Because of the diverse agro-climatic conditions in India, there is a large raw material base suitable for food processing industries. India is the largest producer of livestock, milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat and fruits &vegetables.

India also produces caustic soda and soda ash, which are required for the production of soaps and detergents. The availability of these raw materials gives India the location advantage. Labor cost comparison {draw:frame} (Fig. 2 Labor cost comparison) (Source: www. equitymaster. com _ _Low cost labor gives India a competitive advantage. India's labor cost is amongst the lowest in the world, after China & Indonesia. Low labor costs give the advantage of low cost of production. Many MNC's have established their plants in India to outsource for domestic and export markets. Presence across value chain

Indian companies have their presence across the value chain of FMCG sector, right from the supply of raw materials to packaged goods in the food-processing sector. This brings India a more cost competitive advantage. For example, Amul supplies milk as well as dairy products like cheese, butter, etc. 8. Indian FMCG Sector The Indian FMCG sector is the fourth largest in the economy and has a market size of US$13. 1 billion. Well-established distribution networks, as well as intense competition between the organized and unorganized segments are the characteristics of this sector.

FMCG in India has a strong and competitive MNC presence across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33. 4 billion in 2015 from US $ billion 11. 6 in 2003. The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products. Most of the product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita consumption as well as low penetration level, but the potential for growth is huge.

The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization, increased literacy levels, and rising per capita income. The big firms are growing bigger and small-time companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola (8) and Parle (9).

These are figures the soft drink and cigarette companies have always shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest categories in FMCG. Between them, they account for 35 of the top 100 brands. THE TOP 10 COMPANIES IN FMCG SECTOR (table 3: top 10 co. ’s) Source: Naukrihub. com The companies mentioned in Exhibit I, are the leaders in their respective sectors. The personal care category has the largest number of brands, i. e. , 21, inclusive of Lux, Lifebuoy, Fair and Lovely, Vicks, and Ponds. There are 11 HLL brands in the 21, aggregating Rs. ,799 crore or 54% of the personal care category. Cigarettes account for 17% of the top 100 FMCG sales, and just below the personal care category. ITC alone accounts for 60% volume market share and 70% by value of all filter cigarettes in India. The foods category in FMCG is gaining popularity with a swing of launches by HLL, ITC, Godrej, and others. This category has 18 major brands, aggregating Rs. 4,637 crore. Nestle and Amul slug it out in the powders segment. The food category has also seen innovations like softies in ice creams, chapattis by HLL, ready to eat rice by HLL and pizzas by both GCMMF and Godrej Pillsbury.

This category seems to have faster development than the stagnating personal care category. Amul, India's largest foods company has a good presence in the food category with its ice-creams, curd, milk, butter, cheese, and so on. Britannia also ranks in the top 100 FMCG brands, dominates the biscuits category and has launched a series of products at various prices. In the household care category (like mosquito repellents), Godrej and Reckitt are two players. Goodknight from Godrej is worth above Rs 217 crore, followed by Reckitt's Mortein at Rs 149 crore.

In the shampoo category, HLL's Clinic and Sunsilk make it to the top 100, although P's Head and Shoulders and Pantene are also trying hard to be positioned on top. Clinic is nearly double the size of Sunsilk. Dabur is among the top five FMCG companies in India and is a herbal specialist. With a turnover of Rs. 19 billion (approx. US$ 420 million) in 2005-2006, Dabur has brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real. Asian Paints is enjoying a formidable presence in the Indian sub-continent, Southeast Asia, Far East, Middle East, South Pacific, Caribbean, Africa and Europe.

Asian Paints is India's largest paint company, with a turnover of Rs. 22. 6 billion (around USD 513 million). Forbes Global magazine, USA, ranked Asian Paints among the 200 Best Small Companies in the World Cadbury India is the market leader in the chocolate confectionery market with a 70% market share and is ranked number two in the total food drinks market. Its popular brands include Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems. The Rs. 15. 6 billion (USD 380 Million) Marico is a leading Indian group in consumer products and services in the Global Beauty and Wellness space. 8. Outlook There is a huge growth potential for all the FMCG companies as the per capita consumption of almost all products in the country is amongst the lowest in the world. Again the demand or prospect could be increased further if these companies can change the consumer's mindset and offer new generation products. Earlier, Indian consumers were using non-branded apparel, but today, clothes of different brands are available and the same consumers are willing to pay more for branded quality clothes. It's the quality, promotion and innovation of products, which can drive many sectors. . 2 Sector Outlook Threats: 1. Removal of import restrictions resulting in replacing of domestic brands 2. Slowdown in rural demand Tax and regulatory structure The rural market may be alluring but it is not without its problems: Low per capita disposable incomes that is half the urban disposable income; large number of daily wage earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and festivals and special occasions; poor roads; power problems; and inaccessibility to conventional advertising media.

However, the rural consumer is not unlike his urban counterpart in many ways. The more daring MNCs are meeting the consequent challenges of availability, affordability, acceptability and awareness (the so-called 4 As) The first challenge is to ensure availability of the product or service. India's 627,000 villages are spread over 3. 2 million sq km; 700 million Indians may live in rural areas, finding them is not easy. However, given the poor state of roads, it is an even greater challenge to egularly reach products to the far-flung villages. Any serious marketer must strive to reach at least 13,113 villages with a population of more than 5,000. Marketers must trade off the distribution cost with incremental market penetration. Over the years, India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong distribution system which helps its brands reach the interiors of the rural market. To service remote village, stockists use autorickshaws, bullock-carts and even boats in the backwaters of Kerala.

Coca-Cola, which considers rural India as a future growth driver, has evolved a hub and spoke distribution model to reach the villages. To ensure full loads, the company depot supplies, twice a week, large distributors which who act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas. LG Electronics defines all cities and towns other than the seven metros cities as rural and semi-urban market. To tap these unexplored country markets, LG has set up 45 area offices and 59 rural/remote area offices. The second challenge is to ensure affordability of the product or service.

With low disposable incomes, products need to be affordable to the rural consumer, most of whom are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh — the so-called `Bimaru' States. Hindustan Lever, among the first MNCs to realise the potential of India's rural market, has launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm.

The move is mainly targeted at the rural market. Coca-Cola has addressed the affordability issue by introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from the rural markets. Coca-Cola has also introduced Sunfill, a powdered soft-drink concentrate. The instant and ready-to-mix Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 and mutiserve sachet of 200 gm priced at Rs 15. The third challenge is to gain acceptability for the product or service.

Therefore, there is a need to offer products that suit the rural market. One company which has reaped rich dividends by doing so is LG Electronics. In 1998, it developed a customized TV for the rural market and christened it Sampoorna. It was a runway hit selling 100,000 sets in the very first year. Because of the lack of electricity and refrigerators in the rural areas, Coca-Cola provides low-cost ice boxes — a tin box for new outlets and thermocol box for seasonal outlets.

The insurance companies that have tailor-made products for the rural market have performed well. HDFC Standard LIFE topped private insurers by selling policies worth Rs 3. 5 crore in total premia. The company tied up with non-governmental organizations and offered reasonably-priced policies in the nature of group insurance covers. With large parts of rural India inaccessible to conventional advertising media — only 41 per cent rural households have access to TV — building awareness is another challenge.

Fortunately, however, the rural consumer has the same likes as the urban consumer — movies and music — and for both the urban and rural consumer, the family is the key unit of identity. However, the rural consumer expressions differ from his urban counterpart. Outing for the former is confined to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan. Consumption of branded products is treated as a special treat or indulgence. Hindustan Lever relies heavily on its own company-organized media. These are promotional events organized by stockiest.

Godrej Consumer Products, which is trying to push its soap brands into the interior areas, uses radio to reach the local people in their language. The key dilemma for MNCs eager to tap the large and fast-growing rural market is whether they can do so without hurting the company's profit margins. Mr. Carlo Donati, Chairman and Managing-Director, Nestle, while admitting that his company's product portfolio is essentially designed for urban consumers, cautions companies from plunging headlong into the rural market as capturing rural consumers can be expensive. Any generalization" says Mr Donati, "about rural India could be wrong and one should focus on high GDP growth areas, be it urban, semi-urban or rural. " ISIC 5211 retail sales in non-specialized stores ISIC 5219 other retail sale in non-specialized stores ISIC 5220 retail sale of food, beverages and tobacco in specialized stores ISIC 5231 retail sale of pharmaceutical and medical goods, cosmetic and toilet articles ISIC 5251 retail sale via mail order houses ISIC 5252 retail sale via stalls and markets ISIC 5259 whole sale goods

Supplier industries for FMCGs include 1511 meat and meat products, 1512 fish and fish products, 1513 fruit and vegetables, 1514 vegetable and animal oils and fats, 1520 dairy products, 1531 grain mill products, 1532 starches and starch products, 1533 animal feeds, 1541 bakery products, 1542 sugar, 1543 cocoa, chocolate and sugar confectionery, 1544 macaroni, noodles, couscous, 1549 other food products, 1551 spirits; ethyl alcohol, 1552 wines, 1553 malt liquors and malt, 1554 soft drinks, mineral waters, 1600 tobacco products, 2101 pulp, paper and paperboard, 2102 corrugated paper, containers, 2109 other articles of paper and paperboard, 2424 soap and detergents, cleaning preparations, perfumes. 9. 1 Impulse to go Rural 1. Large Population (_Source: NCAER). _ 2. Rising Rural Prosperity twice as many ‘lower middle income’ households in rural areas as in the urban areas. Distribution of people income-wise (Table 5. ) (Source:NCAER) against is Rs. 3,500 crores in rural India. 3. Growth in Market 4. Effectiveness of Communication 5. IT Penetration in Rural India Into rural India, the possibilities of change are becoming visible. 6. Impact of Globalization FMCG Products and Categories – In recent years, rural markets of India have acquired significance, as the overall growth of the Indian economy has resulted into substantial increase in the purchasing power of the rural communities. On account of green revolution, the rural areas are consuming a large quantity of industrial and urban manufactured products. In this context, a special marketing strategy, namely, rural marketing has emerged.

Rural India with its traditional perception has grown over the years, not only in terms of income, but also in terms of thinking. The rural markets are growing at above two time’s faster pace than urban markets; not surprisingly, rural India accounts for 60% of the total national demand. Today, rural market occupies a larger part of our economy and it is expected to grow at least four times the existing size. Another contributing factor for rural push was growing saturation in urban markets. To be precise, rural marketing in Indian economy covers two broad sections: 1. Selling of agricultural products in the urban areas 2. Selling of manufactured products in the rural regions

In present situation, our huge population is helping marketers to think new marketing strategies. 630 Billion rural populations are greater than total consuming markets of many countries like Canada, South Korea, etc. Tapping the rural market is one of the most important marketing strategies followed by various MNCs and Indian companies now-a-days. A number of companies in FMCG, consumer durables as well as telecom sector have adapted strategies to expand their base in rural market. Among those who have already taken remarkable initiative in rural market are HLL, Colgate, LG Electronics, Philips, BSNL, LIC, Britannia and Hero Honda. Rural Marketing in simple word is planning and implementation of marketing function for rural areas.

Rural marketing has been defined as the process of developing, pricing, promoting, distributing rural specific products and services leading to exchange between urban and rural markets which satisfies consumer demands and also achieves org. objective. Of the two million BSNL mobile connections, 50% are in small towns / villages. Of the six lakh villages, 5. 22 lakh have a Village Public Telephone (VPT). 42 million rural households are availing banking services in comparison to 27 million urban households. Investment in formal savings instruments: 6. 6 millions households in rural and 6. 7 million in urban India. Large Population: Approximately 75% of India's population resides in around 6,38,365 villages of India spread over 32 lakh square kilometer. 41% of India's middle class resides in rural areas.

Higher Purchasing Capacity: Purchasing power of rural people is on rise; Market Growth: Market is growing at a rate of 3-4% per annum. The journey of markets to the rural markets has indeed been one of surmounting one hurdle after another; these include the 4 As - Availability, Affordability, and Acceptance & Awareness - adopting themselves to the rural atmosphere marketers. So, in the context of growth aspects of the Rural markets and their adoption and application by major MNCs and Indian companies, I want to take this Project as my Research Project so that I could go in to the in-depth study of the rural markets- their future scope, challenges etc. in the context of India Rural markets are future battlegrounds' Icfai University Journal of Rural Management: "The very nature of economic activities of rural market extending the provision of quality access to financial solutions is vital for the development of people residing in rural areas". * Khan N. A. , Building Competitiveness in Small-Scale and Rural Industries in India; Icfai University Journal of Rural Management: "The significance of competitiveness in the rural marketing was neglected for a long time in India, but now it is being recognized". {draw:frame} It is interesting to note that consumers will almost always buy exactly what they put on their shopping list.

If they write down flour, they are going to buy flour. What do you think will happen if they write Gold Medal Flour on their list? Getting the consumer to write your brand name on their shopping list almost guarantees they will buy your product instead of your competitors, but how do you get them to do that? The simple answer is continued brand advertising overtime. This helps cement your brand with consumers, but where do you advertise? Having your advertisements running next to the online recipes that mention your product will certainly build brand awareness. Especially since the consumer is usually looking at related recipes while they are planning their trip to the grocery store.

Of course, you could even take that whole concept a step further by providing the recipes on your website where you could also provide the shopping list for that recipe complete with your products brand name. Think of the possibilities…Some consumers don’t write their shopping list down or maybe their printer is out of ink. What would happen if they could get that branded recipe or shopping list sent right to their cell phone by email or sms text? How about a branded iPhone application that would allow the consumer to look up the recipe and download their shopping list right in the grocery store while they are trying to decide “what’s for dinner? ” The possibilities are endless once you start thinking outside the box of conventional advertising and meet the consumer right where they live.

Technology is becoming more and more integrated with our lives and the consumer is using the internet and their cell phones to help them with just about everything including planning their meals and grocery shopping list. FMCG ( fast moving consumer goods ) is a great career opportunity for any professional worth his salt. The success in the sales and marketing division of any FMCG company will depend on great team work. The results are almost directly proportionate to the effort of the field personnel. As the classic saying goes in cricket the longer you stay in the middle the chances of scoring more runs is inevitable unless he is a Boycott type of batsmen. Similarly the more the field work put in by the field staff the greater the results in terms of volume in general. The flip side is that the wholesale channel of distribution is highly unpredictable.

They attract customers based on the simple premise that they sell it cheaper when compared to company recommended billing price to retailer. How does the wholesale sell cheap, by the virtue of their volume purchase they manage to get better discounts, which is primarily cash discount. If they get 2 percent discount they pass on 11/2 percent to the retailer, which obviously explains the deep discount. Many a times some wholesaler go to the extent of selling even below the cost price, they discount the schemes and packing material cost, which is the precise deep discount which in whole parlance is also known as undercutting. Many company personnel are baffled by this phenomenon. {draw:frame} Merchandising: This aspect of sales promotion is ignored by most companies.

But in today’s modern trade context, special sales team is deployed to ensure Merchandising on the shelves. P & G always believe in merchandising their product at prominent and eye catching level. The company used to buy the shelf space for a period of time by paying monthly rental to the shopkeeper. In this manner they established Gillette range against stiff competition from Malhotra blades. Many of the Mega Malls bargain for higher rentals from companies for hiring out their shelf space. In fact some malls collect as much as rent as possible to cover all the overheads in running the establishment. Jo dikta hai woh bikta hai seems to be the philosophy of most street smart sales team. 13. 1 Rural FMCG sales outrun towns

FMCG growth (in value terms) in rural markets has far outpaced the sector's growth in urban markets during the first nine months of the current financial year. Though rural markets are growing from a smaller base, the numbers are stark. In the case of chyavanprash, the whole of urban market has shrunk, while the rural market has grown as much as eight per cent. "This is a new trend. Normally we do not see rural India dominating all categories," said an FMCG analyst. Successive good monsoons and a corresponding growth in farm income have raised the purchasing power of rural households. This, in turn, has fuelled FMCG sales growth in rural markets.

Products that have seen significant growth in rural markets include toothpaste, hair oils and shampoos. Shampoo sales in rural India, for instance, have gone up by 30. 8 per cent compared with just 11 per cent in urban areas. Kunal Motishaw, analyst, Equitymaster, pointed out, "The rural hinterland is more attractive for FMCG companies compared with tier I and II cities as penetration levels are drastically lower for numerous products, unlike urban markets which are highly saturated. " According to Dabur India CEO Sunil Duggal, while the figures may speak of value growth (because there has been no significant change in prices or the product mix in rural markets), in most cases these are also indications of a growth in volumes.

HK Press, executive-director and president, Godrej Consumer Products, said as far as the company's products were concerned, the sales of soaps and hair colors had grown substantially in rural markets in the October-December quarter. 13. 2 The five rupee FMCG lure {draw:frame} The colas may have jettisoned the paanch strategy but a host of branded products are now realizing the importance of being present at the Rs 5 price point. Although brands such as Pepsodent, Maggi, Clinic Plus and Rin have been communicating, through ads, their availability at this price, the phenomenon isn't limited to any specific category: products such as pens, razors, fruit drinks and adhesive tubes too are on the bandwagon, with the price prominently displayed on their packs.

A HLL spokesman says the ready availability of the five-rupee coin has been an advantage; but that isn't the only plus. The offerings mirror consumers' buying behavior: many consumers are not so concerned about grammage as much as price, he says. A relatively bigger pack, compared to the Re 1 and Rs 2 ones, also give consumers enough opportunities to try out the brand, says he, while declining to comment about the impact on volumes and margins. Some of the brands that HLL sells for Rs 5 are Pepsodent, Pond's Talc, Pond's Cold Cream, Rin, Taaza, Fair & Lovely, Clinic Plus and Lux. Mr K. Radhakrishnan, Vice-President, FoodWorld Supermarkets, sees growth in the user-base of brands that have introduced such packs. "Category penetration is the aim.

Coke and Pepsi have hugely succeeded in achieving this over the past year," though much of the gain was lost due to the pesticide issue. The consumer-base for soft drink increased from 160 million in 2002 to 240 million in 2004, a two-year period during which the Rs 5-price point remained in force. The Coca-Cola India President and CEO, Mr. Sanjiv Gupta, says: "The first half of this year has been good but growth has not been what it was in the same period last year. We continue to make money on Rs 5 pricing but now the quantum of money I make per bottle is squeezed. " And this squeeze, brought about by a two per cent cess and higher input costs, has forced cola companies to hike prices by a rupee each on 200 ml and 300 ml pack sizes.

And though the colas no longer sell for Rs 5, they have played a big role in sensitizing the consumer to the price-point, says marketing professional Ms Sangita Joshi, who reckons the Rs 5 packs to play an important role in spurring impulse purchases as well as giving a brand the first-mover advantage in a competitive market. Adds Mr. R. Subramanian, Director of discount chain, Subhiksha: "The small packs will increase user base and usage occasion and can explode the market. " He makes the point that it's more likely that a customer will guzzle a soft drink three separate times when it costs Rs 5 or Rs 6 a bottle than have a single shot at 600 ml of the cola at Rs 15.

According to industry observers, the price point will also help branded FMCG categories which are battling fakes from the unorganized sector. 14. Share of FMCG sector showing a receding trend in Television as well as Press over the past four years: an AdEx India Analysis · In the year 2003, the FMCG sector had a share of 27% in total print and TV advertising contributing 24760 million out of the total advertising of 90520 million. · Share of FMCG in total advertising (TV Press) has shrunk by 11 percentage points in the past four years · Share of FMCG advertising in TV has declined from 57. 6% to 48. 7%, while the same for press has come down from 12. % to 7. 9% during the four year period. · The share has decreased considerably for major categories like aerated drinks and toilet soaps. It is common knowledge that the advertising pie for press and television has shown a steady increase over the past half a decade. However, the following chart presents certain facts that would be a revelation to quite a few of us. The proportion of ad spends by the FMCG sector has been consistently declining over the past four years. The contribution of FMCGs to total advertising has come down by 11 percentage points during the four-year period. {draw:frame} (Fig. 6 contribution of FMCG) (Source: Adex india)

A similar trend was witnessed across both the media – Television and Press. While the contribution of FMCG advertising to total TV spends has diminished from a healthy 57. 6% in 2001 to 48. 7% in 2004 (Till May 15th), the press component of FMCG industry has shrunk from 12. 2% in 2001 to 7. 9% in 2004. {draw:frame} (Fig. 7 source: adex india) {draw:frame} (Fig. 8 source: adex india) LOne crucial point to be noted is that although the total ad spends incurred by the FMCG sector have gone up, it has still not been able to match the pace with which the total pie has grown. One important reason for this is the ever increasing ad spends by new-economy sectors like services, lectronics and automotives, a phenomenon that we would study in detail in the forthcoming special newsletters from AdEx India {draw:frame} (Fig. 9 source: adex india) Now, let us have a closer look by splitting up the various categories within the FMCG sector. The category within the FMCG sector that has pulled down the total share the most has clearly been Food and beverages. The category that used to account for a chunk of TV & press advertising at 45. 5% in 2001 now accounts for 42. 6% while “Others” mentioned in the above chart has also gone down from 6. 7% in 2001 to 4. 1% now. This category of “others” consists of such advertisers as tobacco, liquor, OTC products, etc.

The “Personal care” segment was also showing a receding trend from 2001 to 2003, but it has improved during the first five months of 2004, a trend which may well not continue till year-end. {draw:frame} (Fig. 10 source: adex india) Now, let us look at one major sub-category from each of the main FMCG categories – F, Home care & Personal care. The following chart shows some of the traditional advertising heavyweights in the FMCG sector whose share has shrunk as a percentage of total spends over the past four years. The chart shown above throws up certain interesting numbers, especially in relation to aerated drinks advertising. While the popular perception would be that the cola giants have upped their spends in the recent years, the numbers suggest that their advertising has not grown as fast as some of the other advertisers.

The “Oral care” segment comprising of advertisers like toothbrush, toothpaste, mouthwash, etc has also declined considerably from a proportion of 7. 6% in 2001 to 6. 1% in 2004 (up to May). Similarly, Toilet soaps and face wash advertisers also been contributing progressively lesser to the total advertising in recent times, with the proportion going down to a level of 7. 8% in 2003 as compared to 10% in 2001. Finally, to reiterate the main point, it is possible that total spends for a certain category might have gone up over the four year period. But a decreasing share in spite of increasing spends reflects the fact that the category hasn’t grown as fast as some of the other heavy-spending categories.

The forthcoming special newsletter from AdEx India would attempt to throw some light on some of these booming categories. 15. Company experiences in Going Rural According to a study by the National Council for Applied Economic Research 16. Rural Vs Urban Consumers – Challenges Conclusion After analyzing the various data I have reached to a conclusion that HUL’s products are most known and popular brand in context of home FMCG products in rural market followed by Dabur, ITC and P. Because of huge product line, cheaper cost and brand loyalty, good publicity and advertisement, the rural consumers generally prefers the products of HUL in all segments. Except it, people prefer for good quality and comparatively low price of products.

Recommendation The rural market is very large compared to urban market as well it is more challenging market. The consumer wants those products which are long lasting, good, easy to use and cheaper. The income level of rural consumer is not as high as income level of urban consumer’s that’s why they want low priced products. So, we can say that that’s the reason why sell of sachet is more in rural area in all segments. Its necessary for all major FMCG companies to provide those products which are easy to available and affordable to consumers. It is right that the profit margin is very low in FMCG products, but at the same time market size is quite larger in the rural area. The companies can reduce their prices by cutting down the cost on packing.

Application of 4A* is also a major task for all the big players in this segment. 19. Bibliography For my Report on “Growth of FMCG products in rural market” I have referred to the following sites – Websites (Search engines) www. assocham. org www. equitymaster. com www. exchange4media. com www. wikipedia. com www. business-standard. com www. thehindustanbusinessline. com www. economictimes. com www. google. com www. marketerstoday. com www. ncaer. com www. statisticaloutlineofindia. com 20. Declaration I, hereby declare that the Report titled “Growth of FMCG products in Rural market” is original to the best of my knowledge & has not been published elsewhere.

This is for the purpose of partial fulfillment of Dehradun University for the award of degree of the Master of Business Administration. (Vrushali Awachar) En. No. 09BS0000502 1st Semester IBS, Nagpur 21. Annexure Rural and Urban potential (table 1. Rural and urban population) (Source: Statistical Outline of India (2001-2002) NCAER {draw:frame} (Fig. 2 Labor cost comparison) (Source: www. equitymaster. com) THE TOP 10 COMPANIES IN FMCG SECTOR (table 3: top 10 co. ’s) Source: Naukrihub. com (Table 4 % Distribution) (Source : NCAER). Distribution of people income-wise (Table 5. ) (Source:NCAER) Contribution to press and ad {draw:frame} Contribution to total ad {draw:frame} {draw:frame}

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