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1. RURAL MARKETS
1.1 PROFILE OF RURAL MARKETS
The rise of rural markets has been the most important marketing
phenomenon of the 1990s, providing volume growth to all leading
companies. Many corporates have been trying to get a grip on rural market.
But the challenges are many how to make the product affordable, how to
penetrate villages with small populations, connectivity, communication,
language barriers, spurious brands, etc.
The reasons why companies are going rural are manifold. !igher rural
incomes driven by agricultural growth, increasing literacy rate, high
penetration of T" and other mass media have increased the propensity to
consume branded and value#added products in rural areas. Marketers and
manufacturers are increasingly aware of the burgeoning purchasing power,
vast si$e and demand base of the once neglected %ndian rural markets.
&fforts are now on to understand the attitude of rural consumers, and to
walk their walk and talk their talk. The marketing mi' of many companies is
now being tailored to rural tastes and lifestyles. The %ndian hinterland has
been transformed from a back#to#the#roots holiday destination to a business
proposition.
1.1 (rofile of )ural Markets
1.* )ural Market has +rrived
1. )ural %ncome -isposal (roection
1./ )ural Markets # Mirage or )eality
1. )ural Marketing 2hallenges and 3pportunities
1.4 +ssessing Marketing for )ural %ndia
1.5 )ural Marketing 6trategies
1.7 My "iews
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Two#thirds of the country8s consumers live in rural areas and almost *4
percent of the national income is generated there. +nd 10 consecutive good
monsoons have led to improved returns from agriculture, e'cept the
unfortunate rainfall of the present year. +griculture # The agricultural
sectoris the largest employer in %ndias economy but contributes to a
declining share of its :-( ;15< in *01/#1=. %ndia ranks secondworldwide
in farm output.
To give a boost to the rural economy, the >nion Budget for *01#14 allocated a
total of )s 59,*4 2r for rural development activities including Mahatma
:andhi ?ational )ural &mployment :uarantee +ct ;M:?)&:+=.
>ndeniably, the urban market ;metropolitan cities, tier %%, %%% cities= offers great
opportunities to organi$ed retailers but they are e'pected to saturate in the near
future. Moreover, low penetration rate in rural market facilitates most big retail
companies to enter the untapped rural market ;bottom of the pyramid=. @or
e'ample, %T2 has taken a initiative through 2houpal 6agar, -2M through
!ariyali Aisan Ba$aars, (antaloons in a " with :odre through +adhars,
T+T+ through Aisan 6ansars to name a few. These corporate retailers have
already established the farm linkages resulting in %ndian farmers making good
money, after centuries of social and economic e'ploitation. +lso, as rural areas
have been affected to a lesser degree by the current economic slowdown,
several other %ndian companies are contemplating over launching rural retail
brands. Thus, rural retailing in %ndia has a very long haul ahead.
%n all, there are more than .7 million retail outlets in rural %ndia, averaging
.7 shops per village. 3verall, the rural market has been growing at #/
percent per annum, adding more than 1 million new consumers every year,
and now accounts for close to 0 percent of the volume consumption of fast
moving consumer goods ;@M2:= in %ndia. +s a result, it is becoming an
important part of the market development strategies of all @M2:
companies, including multinational ones, as well as consumer durables
businesses and services companies as well.
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!owever, there are intrinsic problems in the way products and services are
retailed in rural %ndia therefore the organi$ed retailers have been facing a
difficult time to lure customers from traditional kirana stores, especially in the
food and grocery segment. 3ther impediments include gaps in road and
telecommunications connectivity, lack of reliable electricity and water supply,
higher overhead costs, fluctuating demand that depends on the monsoon etc.
)ural populations share several commonalities like domestic constraints,
financial hardships, difficult living conditions, lack of basic information for
making informed decisions, amongst others.
The %ndian rural retail scenario is headed for a Cuantum leap. Besides newer
names set to dot the landscape, new and emerging retail formats are driving the
diversity of the fast#changing retail backdrop. +s organi$ed retail in rural %ndia
awaits the arrival of new players, current maors like %T2 are e'panding their
retail operations by setting up more stores, offering newer product categories
and entering new states. + shift from selling agricultural#inputs will help these
stores target the non#farming segments. %t is a little known fact that *< of the
rural population is not engaged in agriculture but it earns 0< of the ruralincome. The %ndian rural retail market is the ne't growth frontier for corporate
%ndia as it offers an opportunity for a large player to build appro'imately )s.
/0,000 2r retail business spanning multiple categories by the end of *01 ;at
current prices=.
1.2 RURAL MARKET HAS ARRIVED
The @ast Moving 2onsumer :oods ;@M2:= sector in rural and semi#urban
%ndia is estimated to cross >6D *0 billion by *017 and >6D 100 billion by *0*
The rural @M2: market e'panded at a 2+:) of 1.* per cent to >6D 100
billion during *0091
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%n rural markets, durables like refrigerators as well as consumer electronic
goods are likely to witness growing demand in the coming years as the
government plans to invest significantly in rural electrification
Nu!er O" P#tential $#n%uer% in Rural Market & '2( illi#n )e#)le
$urrent S*are O" Rural Market + Ur!an Market in Retail Se,t#r-
E%tiate annual %i/e #" t*e rural arket%
T0)e #" )r#u,t $#ntri!uti#n in
Rural Market
R%.
FMCG
Consumer Durables
Agro-Inputs
Automobiles(includingTractors)
Rs. 7!"""#-Crores
Rs. $!"""#-Crores
Rs. !"""#-Crores
Rs.%"!"""#-Crores
Total )s. *,0,000E#
/
Type of :oods )ural; < = >rban ;< =
@M2: /0< 40F, %T2, 2oca#2ola, F:, Britannia, (hilips,
2olgate#(almolive etc., penetrated aggressively into the rural markets and
spent heavily in the rural areas. 6ome of them even invested money to
create separate sales and marketing teams e'clusively for rural markets.
They also appointed specialist agencies that could advise them on rural
marketing.
The Rural Maret !cenario
The rural markets offered a huge potential to the business houses because of
their enormous spread and rising consumer demands. +round the world,
over / billion people survived in rural areas that came to more than 40
percent of the total population.
1*
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%n %ndia also, the ratio of rural to urban population was slightly higher than
the worlds ratio with 50 percent of them living in rural areas. They
domiciled in nearly 4,*5,000 villages spread over .* million sC. km. This
growing affluence along with good monsoon and the increased agriculture
output, increased the total disposable income of rural consumers to 7
percent with two#third of middle#income households being in the rural
market.
+bout /0 percent of the graduates coming out of %ndian >niversities were
from rural areas. +s they are eager to earn more and live better, their
aspirations are similar to the urban youth. %t is predicted by industry analysts
that by *01/ 1, the urban households are proected to grow by / percent
while rural households are e'pected to grow by 11 percent.
%f the rural income rose by 1
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market. This has been possible due to the penetration of cable and satellite
channels that have brought down the world at the fingertips of the common
man.
The media influenced the mindset of the rural consumer to such an e'tent
that people who had money started purchasing the products unmindful of
the costs, ust to satisfy their needs as well as their ego. But, the growth of
rural market could be attributed to many other reasons that in one way
increased the sales as well as the profits of the companies.
6ome of the important causes for the growth of rural markets are
The rise in disposable income of the rural families
The economic boom
Timely rains
)ural population involved themselves in business other than
agriculture
%ncrease white#collar obs in nearby towns
2ommerciali$ation of agriculture
6aturation of the urban markets
Media penetration in rural areas ;particularly satellite channels=
:lobali$ation
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&conomic liberali$ation
)evolution in the %nformation Technology
Jomen empowerment
%mproving infrastructure
!owever, there was a significant role of the corporate enterprises
simultaneously in the development of rural market. Their timely
intervention into the rural areas, their appropriate planning, their perception
and identification about the growth of rural markets and the use of
marketing strategies all have eCually contributed for the progress of rural
markets. &ven though corporate houses were hedged with so many problems
in the rural areas, they saw a galore of opportunities in the rural market and
converted all the pessimistic characteristics of the rural market into
affirmative attributes.
They satisfied themselves with the availability of limited infrastructure, sawa sign of prosperity rather than fear during the entry of competitors into the
rural markets, showed e'citement at the availability of satellite channels in
the rural households, visuali$ed their cash bells ringing with the increase in
purchasing power of the rural masses that came eCuivalent to their urban
counterparts.
1.' RURAL MARKETIN8 STRATE8IES
Increasing brand awareness
%n the rural families, studies indicate a slow but determined shift in the use
of categories. There is a remarkable improvement in the form of products
used. @or instance, households are upgrading from indigenous teeth#
cleaning ingredients to tooth powder and toothpastes, from traditional
mosCuito repellant to coils and mats. There is also a visible shift from local
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and unbranded products to national brands. @rom low#priced brands to
premium brands.
$MG consu#"tion
3rgani$ations like !industan Fever Ftd., ?irma 2hemical Jorks, 2olgate
(almolive, (arle foods etc have carved inroads into the heart of rural
markets. "arious categories of products have been able to spread their
tentacles deep into the rural market and achieved significant recognition in
the country households. +nd, in the process, the leading brands displaced
the regional brands, local brands and the other unbranded offerings.
2ompany !ousehold penetration
HUL
Nira $*ei,al @#rk%
$#lgate Pal#li3e
Parle F##%
77F has seen a sluggish topline
*
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growth over the pat two years largely because of a slowdown in demand
from rural areas. The company can be e'pected to capitali$e heavily on a
revival in farm income. %nfact, !industan Fever was one of the biggest
gainers. 3thers that could gain too include ?irma, 2olgate (almolive,
Britannia %ndustries and Tata Tea.
The other gainers could be tractor maors who have faced a sharp slump in
demand over the past two years. The decline in farm income had forced a
big slump in tractor sales. Tractors sales are almost first to be impacted by a
change in farm income.
%t is e'pected that tractor maors such as (unab Tractors and Mahindra H
Mahindra would be biggest beneficiaries of a look up in the prospects. Both
the stocks, particularly, Mahindra H Mahindra, has taken a big hit in
valuations due to the fall in sales. Both the companies are fundamentally
sound and have very good management. + surge in rural economy would
also mean more transportation needs, increased housing and larger demand
for services. 2M%& proects the growth in services at 5 per cent in the
current year.
3verall, it can be said that the worst may soon be over for the economy and
things could begin to look much better from the second half of the year.
*/
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4. TAPPIN8 INDIAS RURAL MARKET
Introduction
Ten years ago, foreign consumer products were scarce in %ndia and only
available to the affluent. %mport restrictions prevented or severely hindered
foreign consumer goods from entrance to %ndia. Jith the economic
liberali$ation that ensued, foreign brands are now prevalent across %ndia.
Today, multinational corporations view emerging markets like %ndia as
prime opportunities for growth. )ural markets are growing twice as fast as
the urban markets. :enerally speaking, success in %ndia8s rural markets for
multinational corporations has been mediocre at best. %t is from these
struggles and failures, however, those multinational corporations seeking to
enter the rural %ndian market can learn how to do so more wisely.
)nderstand the Rural Maret
I %ntroduction I >nderstand the )ural Market I )ural %ncome
I (roducts and uses I (artnering I Buy#out
I Tackle the -istribution ?etworks I (oint of 6ale
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Jith a population already in e'cess of one billion people, %ndia has caught
the eye of multinational corporations across the globe as a place of
opportunity for e'ploring new markets. Jhile %ndia has portions of their
population that would be considered wealthy or middle class by Jestern
standards, a much greater percentage of %ndia8s population is low income.
+s a result, they spend money, live, and use products differently than the
countries where most multinational corporations originate. )ural areas, in
particular, e'emplify these differences. >nderstanding the characteristics
that make the people and the market in rural %ndia uniCue can help
corporations to enter this market with success.
Rural Inco#e
Jith an average income eCuivalent to )s. *000 per month, rural %ndians
have a very low disposable income. Most rural homes have minimal storage
space and no refrigeration. "ery few people own or have access to cars. +s
a result, rural %ndian purchasing habits tend to be of an Learn today, spend
today mentality. )ather than buying in bulk, which would mean payingmore for a large Cuantity upfront, rural %ndians tend to buy what they need
for short segments of time. These factors result in consumers buying
products locally, as well as on a daily basis.
%n addition to the fact that income levels are low, rural incomes also vary
greatly depending on the monsoons. Jhen a monsoon hits, this devastates
the livelihood of most rural consumers because they are dependent on
agricultural work for income. 2orporations are also directly affected
because this makes it difficult to predict demand.
Products and )ses
Before a company considers entering the rural market, understanding the
types of products and packages that rural %ndians typically use is crucial. @or
e'ample + company seeking to enter %ndia8s market with an oral care
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product, this would be an important fact to know and consider during both
the product and package development stages. 6imilarly, !industan Fever
Ftd. ;!>F= discovered that rural %ndians tend to use the same soap for
washing everything from hair to their bodies to clothing. Because !>F
manufactures products including various soaps and detergents, !>F product
and packaging development processes have taken this rural habit into
account by designing all#in#one soaps.
By taking into account the low disposable incomes and the uniCue product
and package needs of this market, consumer products that are designed and
packaged for this market have great potential.
Partnering
The first and best option for aligning with the %ndian industry is for the
multinational to partner with an %ndian company that is already successfully
producing and selling a similar type of product. %n doing so, the new
company can take advantage of the manufacturing facilities and distribution
networks that are already in place rather than having to start from scratch.
+s a result of %ndia8s colonial e'perience when it was controlled by Britain,
many %ndians have LPa profound mistrust of foreign brands . By creating
a partnership with an %ndian company plays down the foreign factor and
helps to dispel some of this mistrust.
!industan >niFever is a multinational corporation that has found success
with this method of aligning with industry. By partnering with local
entrepreneurs who own and manage their own plants, !industan Fever isable to manufacture their products with minimal amounts of fi'ed capital. %n
these partnerships, the entrepreneurs agree to devote their plant8s capacity to
manufacturing only !industan Fever products.
*u'+,ut
+ second alternative for aligning a new industry to enter %ndia8s rural market
is to buy out a local %ndian manufacturer. +s with partnering, buying out a
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local manufacturer gives a company the ability to capitali$e on e'isting
manufacturing facilities and distribution networks.
The disadvantage is that %ndian consumers may view this negatively. 2oca#
2ola is an e'ample of a multinational corporation that tried buying out a
local distributor. %n 199*, 2oca#2ola made its second appearance to the
%ndian market. %n an attempt to eliminate its biggest competitor, 2oca#2ola
acCuired Thumbs >p, the local market leader in cola. Jhen 2oca#2ola tried
to e'change its own brand on the regular Thumbs >p distribution network,
%ndian consumers looked unfavorably upon 2oca#2ola. The company has
been struggling ever since.
Tacle the Distribution -etwors
-istribution networks in emerging markets tend to be very uniCue and often
times disointed. %ndia is no e'ception. Before a multinational corporation
even considers entering %ndia8s rural market, it is important to first get an
understanding of the current distribution system characteristics as well as
the ways that the system is likely to change over time.
%n doing so, a company can assess whether or not accurate and timely
product distribution can be achieved without first investing in the
distribution networks. 6ome of the characteristics uniCue to rural %ndia8s
distribution networks include the modes of transportation used as well as the
point of sale. -espite the challenges of the rural %ndian distribution
environment, there have been distribution successes from multinational
corporations.
Point of !ale
The retail establishment where most rural consumers purchase their day#to#
day goods is at a kirana or street shop. These small open stalls line the
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streets and are appro'imately the si$e of a living room. 2onsumers purchase
everything from bananas to ra$ors at a kirana.
Jith over *. million kiranas throughout %ndia8s rural towns and villages,
keeping store shelves stocked is one of the main challenges to consumer
goods manufacturers. %n order to reach these local shops and establish a
brand presence in them, companies need substantial amounts of working
capital and a large committed sales force.
!uccess !tories
%n spite of all the distribution challenges, there have been several
multinational corporations that have e'perienced great successes in tackling
the distribution networks. !industan Fever has been able to build a
distribution network in %ndia that directly serves 700,000 stores and uses
wholesalers and distributors to reach another . million outlets. ?ot only
does this help !industan Fever move products from manufacturing facilities
to retail outlets, it also provides a large deterrent to potential competitors.
Thin !#all
-ue to the fact that rural %ndians have small disposable incomes and very
little storage space, one of the most popular concepts to hit the rural market
has been a sachet. 6achets are plastic pouches that contain appro'imately *0
milliliters of product.
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+n %ndian company selling a 10#milliliter sachet of "elvette shampoo first
introduced sachets to %ndia in the 19908s. Before the sachet, shampoo in
%ndia was only available in larger bottles, therefore limiting its sales success
among people with small incomes. 6achets meet the needs of the rural
consumer in several ways. 6achets are ine'pensive, they occupy a small
amount of space, and they allow consumers to e'periment with new
products that they may never have tried before.
2oca#2ola is another company that has found success by thinking small. %n
a packaging change aimed directly at the rural and lower#income markets,
2oca#2ola launched a new *00 ml bottle for the eCuivalent of 10 cents in
*001. +fter introducing the smaller si$e bottle, sales increased / percent by
the end of the first Cuarter in *00*. (ackaging in smaller units clearly helps
to increase the affordability of products for rural %ndian consumers.
isual o##unication
The rural area is a market where large portions of the population are
illiterate. 6o, when packaging consumer products for rural markets,
companies must use prominent logo symbols and logo colors to assure that
illiterate consumers will be able to recogni$e the products. Therefore,
communicating brand values through the package rather than with words
becomes essential. &motional 6urplus %dentity ;&6%= is a concept that uses
the shape, color, and content of a package to differentiate a brand in the eye
of a consumer.
By creating a bond with the consumer through the package, companies are
able to establish a relationship that encourages repeat purchases. Foud,
bright colors are typically used on packages to differentiate a product from
the others on the shelf and to create a lasting impression in a consumer8s
mind.
0
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+nother techniCue used by multinational corporations has been tailoring
products, including changing brand names, to give them a rural image. %n
the eyes of the consumer, branded products are associated with Cuality and
value. ?irma, the largest selling detergent in the world, found success in the
rural %ndian market by using unelaborated packaging to position their
product, as one that cleaned well yet was affordable. Jhile this techniCue is
not the most eye#catching, it allows rural %ndian consumers to e'perience
the benefits of a branded product without reCuiring elaborate or e'pensive
packaging on the part of the multinational corporation.
M0 3ie% #n ta))ing t*e rural arket%
Jith an appro'imate population of 500 million people, the rural %ndian
market is important for multinational corporations to tap. +lthough rural
%ndians need to purchase consumer goods ust as their Jestern counterparts
do, rural %ndian consumers have a different set of needs that must be met by
both package and product. 6pending time researching the rural %ndian
consumer as well as the market before diving in can help to prevent
unnecessary struggles and failures. %f the opportunity e'ists, partnering with
an e'isting %ndian company upon market entry can provide several key
advantages to a company.
>nderstanding the available distribution networks in rural %ndia is crucial to
making a successful entry into the rural %ndian market. (ackages need to be
designed to withstand more distribution abuse due to poor roads and more
primitive mode of transportation. @inally, when creating a package for rural
%ndia, small si$es allow consumers to try new products. %t also caters to the
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fact that most rural %ndians have low disposable incomes and little storage
space at home. By applying these lessons that have been learned from
multinational corporations in the past, the task of entering the rural %ndian
market should be promising.
6. HINDUSTAN UNILEVER LIMITEDHUL
/.1 (rofile of !>F
/.* !>F8s (roect 6hakti
I Jhy 6haktiQ I 6hakti# Jhere are we todayQ
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6.1 PROFILE OF HINDUSTAN LEVER LTD.
!industan >nilever Fimited ;!>F= is %ndias largest @ast Moving
2onsumer :oods 2ompany with a heritage of over 70 years in %ndia and touches
the lives of two out of three %ndians.
!>F works to create a better future every day and helps people feel good, look
good and get more out of life with brands and services that are good for them and
good for others.
Jith over brands spanning *0 distinct categories such as soaps, detergents,
shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged
foods, ice cream, and water purifiers, the 2ompany is a part of the everyday life of
millions of consumers across %ndia. %ts portfolio includes leading household
brands such as Fu', Fifebuoy, 6urf &'cel, )in, Jheel, @air H Fovely, (ond8s,
"aseline, FakmR, -ove, 2linic (lus, 6unsilk, (epsodent, 2loseup, +'e, Brooke
Bond, Bru, Anorr, Aissan, Awality Jall8s and (ureit.
The 2ompany has over 14,000 employees and has an annual turnover of %?)
0,150 crores ;financial year *01/ 1=. !>F is a subsidiary of >nilever, one of
the world8s leading suppliers of fast moving consumer goods with strong local
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roots in more than 100 countries across the globe with annual sales of S/7./
billion in *01/. >nilever has 45.*< shareholding in !>F.
!>Fs "ision
G >nilever is a uniCue company, with a proud history and a bright future. Je have
ambitious plans for sustainable growth and an intense sense of social purpose.G
!>Fs (urpose H (rinciple
3ur 2orporate (urpose states that to succeed reCuires Gthe highest standards of
corporate behaviour towards everyone we work with, the communities we touch,
and the environment on which we have an impact.G
6.2 HUL% PRO5E$T SHAKTIG
(roect 6hakti, a low cost distribution model, was rolled out in *000 by
!industan Fever Fimited ;!>F= to attack the bottom of the pyramid. True,
the company had e'perimented with mobile retailing for rural markets in the
late#1970s and (roect Bharat in the mid#1990s that focused on increasing
penetration and raising awareness.
But (roect 6hakti was introduced with an aim to
bring down distribution costs in rural markets. The
traditional distribution systems used in urban markets
were costly to replicate in smaller areas.
LJe had to create a low#cost vehicle for markets that
had a population of less than *,000, in 6hakti, !>F.
The company appointed women entrepreneurs from villages as distributors
of !>F8s range of products.
The 1#month pilot proect in +ndhra (radesh turned out to be a good
learning ground. @or instance, the company initially decided to save
distributor margins by cutting one layer of distribution the local
distributor. These savings helped in giving higher margins to the 6hakti
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entrepreneurs and retailers. 6tocks were directly sent to the 6hakti
distributor from the local 2#and#@ ;carry and forward= depots. !owever,
cutting the local distributor had its own shortcomings because they help
redistribute stocks in smaller Cuantities. To e'pect that service from a large
2#and#@ depot was difficult.
Then, local distributors also managed issues like giving credit to the small
retailer they had more information about the credit value of local retailers
or the 6hakti entrepreneurs. Jithin si' months, !>F had to reinstate the
local distributor in (roect 6hakti.
+nother learning was that most 6hakti entrepreneurs had never ventured
into business. Thus, handholding became critical. !>F invested in creating
awareness about the 6hakti woman entrepreneur. !>F offered incentives to
villagers who buy from the 6hakti representative.
I" ,#n%uer% ,ann#t l#,ate t*e S*akti #an ea%il0= it naturall0 take%
#re tie "#r *er t# e%ta!li%* t*e !u%ine%%G
!owever, 6hakti is still trying to effectively bring down distribution costs.
Manpower costs is one area where a lot could be done it forms 70 per
cent of total costs in selling to the B3(. The task is manpower intensive, as
employees are reCuired to identify and develop new B3( markets, train the
entrepreneurs and revisit e'isting markets to ensure that it has adeCuate
stocks.
!ence, !>F is e'perimenting with three#four pilot models. %t has rolled out
mobile trainers who move from village to village and perform multi#
functions from selecting entrepreneurs, training them and handholding. %t is
also e'perimenting with e'clusive trainers.
+t present, 6hakti accounts for #4 per cent of !>F8s total sales and reached a
break#even point on operational e'penses in *01/. (roect 6hakti also consists of
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public awareness programs focusing on health and hygiene, as well as an i#6hakti
initiative that allows villagers to access information through kiosks. By the end of
*005, more than /,000 6hakti entrepreneurs covered million homes in 100,000
villages in 1 %ndian states. >nilever aims to increase the number of 6hakti
entrepreneurs that they recruit, train and employ from /,000 in *010 to 5,000 in
*01.
!industan Fever has built alliances with telecom H banking companies to
increase the income of the 6hakti family with the sale of telecom prepaid
currency, sim activations and acting as a banking correspondent.
6hakti is now being adapted in other >nilever markets such as 6ri Fanka, "iet
?am and Bangladesh, and is also being considered for Fatin +merican and
+frican markets. +t the end of *005, 6ri Fanka had over ,00 entrepreneurs
covering *5,000 households in /,000 villages, and /,*0 entrepreneurs in
Bangladesh were covering /00,000 households in 7,000 villages.
(/0 !/A1TI
E)#ering @#en in Rural Inia
The obective of proect 6hakti is to create income#generating capabilities
for neglected rural women, by providing a sustainable micro enterprise
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opportunity, and to improve rural living standards through health and
hygiene awareness.
@ollowing the pioneering work carried out by grameen bank of Bangladesh,
several institutions, ?:36 and government bodies have been working
closely, for nearly five years, to establish self help groups ;6!:s= of rural
women in villages across %ndia. Their e'periments clearly indicate that
micro#credit, when carefully targeted and well administered can ease
poverty significantly.
+ key lesson learnt was that rural upliftment depended not on successful
infusion of credit, but on its guided usage for better investment
opportunities
This is where !>Fs proect 6hakti is playing a role in creating such
profitable micro enterprise opportunities for rural women.
Ri%k&"ree i,r# enter)ri%e t*at 0iel% *ig* return%
+ typical 6hakti entrepreneur conducts a steady business, which gives her
an income in e'cess of )s.*,000 per month on a sustainable basis. +s most
of these women live below the poverty line, and hail from e'tremely small
villages ;with populations of less than *000=, this earning is very significant,
and almost twice the amount of their previous household income.
@or most of these families, proect 6hakti is enabling families to live with
dignity, with real freedom from want.
%n addition to money, there is a marked change in the womans status within
the household, with a much greater say in decision#making. This results in
better health and hygiene, education of the children, especially the girl child,
and an overall betterment in living standards.
The most powerful aspect about this model is that it creates a win#win
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partnership between !>F and the consumers, some of whom will depend on
the organi$ation for their livelihood, and build a self#sustaining cycle of
growth for all.
!/A1TI3 (/&R& (& AR& T,DA0
The model was piloted in ?algonda district of +ndhra (radesh in 0 villages
in the year *000. The government of +ndhra (radesh took the pioneering
step of supporting the initiative by enabling linkages with the network of
-warka groups of rural women set up for their development and self#
employment. Most 6!: women view proect 6hakti as a powerful business
proposition and are keen participants in it. %t has since been e'tended to in
+ndhra (radesh, Aarnataka, :uarat, Madhya (radesh, >ttar (radesh,
Tamilnadu, 2hattisgarh and 3rissa.
,T/&R ATIITI&!
To improve the business skills of the rural women, e'tensive training
programmes are being held. 6uch workshops have already covered a large
number of 6hakti entrepreneurs in +ndhra (radesh, Aarnataka, :uarat,
Madhya (radesh, >ttar (radesh, Tamilnadu, 2hattisgarh and 3rissa.
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+s part of their training programme, all !>F management trainees spend
about / weeks on proect 6!+AT% in rural areas with ?:36 3) 6!:6.
+ssignments include business process consulting for growing enterprises
engaged in the manufacture of products such as spices and hosiery items.
(/0 I+!/A1TI
+ key factor that has inhibited the development of rural %ndia has been
lack of access to critical information and services. :iven
%ndia8s large geography and weak infrastructure, it is often
difficult to reach out to the rural areas.
%n order to impact both livelihood opportunities and living standards of rural
communities K%#6hakti8 # an %T#based rural information service has been
developed to provide information and services to meet rural needs in
agriculture, education, vocational training, health and hygiene.
The premise of the %#6hakti model is to provide need based demand driven
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information and services across a large variety of sectors that impact the
daily livelihood opportunities and living standards of the village community.
The %#6hakti kiosk will be operated by the 6hakti entrepreneur, which
further strengthens the relationship they have already cultivated and builds
new capacity. !>F e'pects that the information provided would improve
the productivity of the rural community and unlock economic and social
progress.
I+!/A1TI3 T/& PI4,T PR,5&T
K%#6hakti8 kiosks have been set up in 7 villages in +ndhra (radesh, and have
been functional since +ugust *00.
The kiosks offer information chiefly in the form of audio#visuals in the
following areas
!ealth and !ygiene
:overnance
&ducation
+griculture
&mployment
Fegal services
"eterinary services
The information provided in the above areas is culled from the best
available resources, taking additional care to ensure that information,
especially in areas like agriculture, is locally relevant and includes inputs
from home#grown e'perts. These e'perts are also available on reCuest, to
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help provide solutions to problems raised by users through a Cuery mailing
system.
The kiosks have received a great response from the local public. -uring the
launch of these kiosks, important village members like the sarpanch,
schoolteacher and doctor are invited to help reinforce relationships with the
villagers.
The kiosks remain open from 9 a.m. to 5 p.m., si' days of the week. To
enable access to the services, users have to register themselves first and
obtain the uniCue registration number. +n id card with the registration
number is provided for use every time they visit the kiosk.
+ farmer from the village can obtain a Cuick solution to a pest problem with
his crops. (eople can also send Cueries on health and hygiene to a local
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doctor for a speedy response. "illagers can avail of discount coupons from
the kiosk for medical treatment from doctors operating in local areas.
:. INDIAN TOCA$$O $OMPAN9 IT$
:.1 THE IT$ PROFILE
%T2 is one of %ndias foremost private sector companies with a market
capitali$ation of over >6 D /0 billion and a turnover of >6 D 7 billion.
)ated among the @#rl% Ce%t Cig $#)anie%by @orbes maga$ine and
among Inia% M#%t Re%)e,te $#)anie%by Business Jorld, %T2 ranks
third in pre#ta' profit among %ndias private sector corporations. %T2 is
rated among the Jorlds Best Big 2ompanies, +sias @ab 0 and the
Jorlds Most )eputable 2ompanies by @orbes maga$ine and as %ndias
Most +dmired 2ompany in a survey conducted by @ortune %ndia maga$ine
and !ay :roup. %T2 also features as one of worlds largest sustainable value
creator in the consumer goods industry in a study by the Boston 2onsulting
.1 The %T2 (rofile
.* %T28s )ural -evelopment (hilosophy
. %T2 Tapping the )ural Battle
./ Jorking of houpal
/*
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:roup. %T2 has been listed among %ndias Most "aluable 2ompanies by
Business Today maga$ine. The 2ompany is among %ndias 10 Most
"aluable ;2ompany= Brands, according to a study conducted by Brand
@inance and published by the &conomic Times. %T2 also ranks among +sias
0 best performing companies compiled by Business Jeek.
%T2 has a diversified presence in 2igarettes, !otels, (aperboards H
6pecialty (apers, (ackaging, +gri#Business, and (ackaged @oods H
2onfectionery, %nformation Technology, Branded +pparel, :reeting 2ards,
6afety Matches and other @M2: products. Jhile %T2 is an outstanding
market leader in its traditional businesses of 2igarettes, !otels,
(aperboards, (ackaging and +gri#&'ports, it is rapidly gaining market share
even in its nascent businesses of (ackaged @oods H 2onfectionery, Branded
+pparel and :reeting 2ards.
+s one of %ndias most valuable and respected corporations, %T2 is widely
perceived to be dedicatedly nation#oriented. %T2s diversified status
originates from its corporate strategy aimed at creating multiple drivers of
growth anchored on its time#tested core competencies unmatched
distribution reach, superior brand#building capabilities, effective supply
chain management and acknowledged service skills in hoteliering.
The 2ompanys houpal initiative is enabling %ndian agriculture
significantly enhance its competitiveness by empowering %ndian farmers
through the power of the %nternet. This transformational strategy is e'pected
to progressively create for %T2 a huge rural distribution infrastructure,
significantly enhancing the 2ompanys marketing reach.
%T2 employs over *0,000 people at more than 40 locations across %ndia.
)anked among %ndias most valuable companies by the Business Today
maga$ine, %T2 continuously endeavors to enhance its wealth generating
capabilities in a globalising environment by the following corporate
strategies
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2ontinue to focus on the core businesses of 2igarettes H Tobacco, !otels,
and (ackaging H (aperboard.
&nsure that each of its businesses meets the three criteria of sustainability,
namely Market 6tanding, (rofitability and %nternal "itality. &'it from
businesses, which do not meet these criteria within an agreed time frame.
&nsure that each business is internationally competitive in the %ndian
global market.
2reate distributed leadership within the organisation by nurturing talented
and focused top management teams for each of the businesses.
6ecure the future growth of the 2ompany by creating new businesses,
which leverage the strength of its core competencies, residing in various
businesses.
:.2 IT$S RURAL DEVELOPMENT PHILOSOPH9
4&T6! P)T I-DIA $IR!T
%T2 believes that an effective growth strategy for our nation must address
the needs of rural %ndia, home to 5< of our poor. %t is imperative to ensure
that %ndias economic growth is inclusive, embracing its villages, so as to
free millions of our disadvantaged citi$ens from the indignity of poverty.
//
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%t is %T2s belief that %ndias rural transformation cannot be brought about by
the government alone. ?or can the efforts of a few enterprises make a
decisive difference. 3nly an inspired public#private partnership can
transform lives and landscapes in rural %ndia. %T2s humble endeavours have
demonstrated that it is possible to create and sustain a model that can
harmoni$e the need for shareholder value creation with making a substantial
contribution to society.
%T2 has partnered the %ndian farmer for close to a century. %T2 is now
engaged in elevating this partnership to a new paradigm by leveraging
information technology through its trail#bla$ing e#2houpal initiative.
+dditionally, %T2 is significantly widening its farmer partnerships to
embrace a host of value#adding activities creating livelihoods by helping
poor tribals make their wastelands productiveN investing in rainwater
harvesting to bring much#needed irrigation to parched dry landsN
empowering rural women by helping them evolve into entrepreneursN
enhancing livestock Cuality to significantly improve dairy productivityN
providing infrastructural support to make schools e'citing for village
children. Through these rural partnerships, %T2 touches the lives of over .
million villagers across %ndia.
F#r IT$= t*e%e are e)re%%i#n% #" a ,#itent !e0#n t*e arket. O"
a ,#n3i,ti#n t*at ,#untr0 u%t ,#e !e"#re ,#r)#rati#n. O" a true )rie
in !eing $iti/en Fir%t.
:.4 IT$ TAPPIN8 THE RURAL CATTLE
The concept of a market waiting to be tapped at the bottom of the pyramid8
has caught the imagination of business people. To grow the market,
companies should redesign products targeted at richer buyers to bring them
within the reach of poorer people in %ndia and other developing countries.
+nother way to do that is to grow the incomes of the poorer people. The two
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approaches, from the supply and the demand sides can go hand#in#hand, as
%T2 is showing in its rural marketing.
%T2 launched its houpal initiative that can change the face of the
company. %n une *000, it began e'perimenting with this %nternet#based
proect for rural %ndia. This houpal operates as %nternet#based trading,
marketing and distribution channels of goods and services across the rural
economy. The houpal model confers the power of e'pert knowledge on
even the smallest of individual farmers. %t is gradually enabling a
revolutionary model shift that is enhancing the international competitiveness
of %ndian agriculture. Jhile the proect currently services over a million
farmers through its 1,0/ kiosks in 4,000 villages, it eventually aims to
cover over one#lakh villages in the ne't five years that would include one#
si'th of %ndias villages.
The company believes that a market#led model like the houpal can
induce higher productivity and higher incomes in the rural community. %n
turn, %T2 hopes that the relationship established with the farmers will help
gain their confidence so that they can trust %T2 as a reliable supplier of
goods and services on the one hand, and as a cost#effective buyer of farm
output on the other.
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Through the houpal initiative, %T2 aims to confer the power of e'pertknowledge on even the smallest individual farmer. Thus enhancing his
competitiveness in the global market.
:.6 @ORKIN8 OF E&$HOUPAL
The *ig Picture3
%T28s %nternational Business -ivision, one of %ndia8s largest e'porters of
agricultural commodities, has conceived houpal as a more efficient
supply chain aimed at delivering value to its customers around the world on
a sustainable basis. The houpal model has been specifically designed to
begin the challenges posed by the uniCue features of %ndian agriculture,
/5
E $*#u)al 7 at a 8lan,e Agena "#r t*e net De,ae
Mile%t#ne%
2ommencement of initiative
*000
################
6tates covered 4
"illages covered 1,000houpal installations *00
&mpowered e#farmers .
million
6tates to be covered 1
"illages to be covered1,00,000
houpal to be installed
*0,000
@armers to be e#empowered
10 million
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characteri$ed by fragmented farms, weak infrastructure and the involvement
of numerous intermediaries.
The alue hain + $ar# to $actor' Gate3
Khoupal8 also unshackles the potential of %ndian farmer who has been
trapped in a vicious cycle of low risk taking ability U low investment U low
productivity U weak market orientation U low value addition U low margin U
low risk taking ability. This made him and %ndian agribusiness sector
globally uncompetitive, despite rich H abundant natural resources.
6uch a market#led business model can enhance the competitiveness of
%ndian agriculture and trigger a virtuous cycle of higher productivity, higher
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incomes, enlarged capacity for farmer risk management, larger investments
and higher Cuality and productivity.
@urther, a growth in rural incomes will also unleash the latent demand for
industrial goods so necessary for the continued growth of the %ndian
economy. This will create another virtuous cycle propelling the economy
into a higher growth traectory.
The Model in Action3
+ppreciating the imperative of intermediaries in the %ndian conte't,
Khoupal8 leverages %nformation Technology to virtually cluster all the
value chain participants, delivering the same benefits as vertical integration
does in mature agricultural economies like the >6+.
Khoupal8 makes use of the physical transmission capabilities of current
mediators aggregation, logistics, counter#party risk and bridge financing
while disintermediating them from the chain of information flow and marketsignals.
Jith a careful merge of click H mortar capabilities, village internet kiosks
managed by farmers called sanchalak themselves,
enable the agricultural community access ready
information in their local language on the weather H
market prices, disseminate knowledge on scientific farm practices H risk
management, facilitate the sale of farm inputs ;now with fi'ed knowledge=
and purchase farm produce from the farmers8 doorsteps ;decision making is
now information#based=.
)eal#time information and customi$ed knowledge provided by Khoupal8
improve the ability of farmers to take decisions and align their farm output
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with market demand and secure Cuality H productivity. The aggregation of
the demand for farm inputs from individual farmers gives them access to
high Cuality inputs from established and reputed manufacturers at fair
prices. +s a direct marketing channel, virtually linked to the Kmandi8 system
for price discovery, Khoupal8 eliminates wasteful intermediation and
multiple handling. Thereby it significantly reduces transaction costs.
Khoupal8 ensures world#class Cuality in delivering all these goods H
services through several product E service specific partnerships with the
leaders in the respective fields, in addition to %T28s own e'pertise. Jhile the
farmers benefit through enhanced farm productivity and higher farm gateprices, %T2 benefits from the lower net cost of procurement ;despite offering
better prices to the farmer= having eliminated costs in the supply chain that
do not add value.
The !tatus of &ecution3
Faunched in une *000, houpal, has already become the largest
initiative among all %nternet#based interventions in rural %ndia.
houpal services today reach out to more than . million farmers
growing a range of crops # soyabean, coffee, wheat, rice, pulses, shrimp # in
over 1,000 villages through *00 kiosks across seven states. The problems
encountered while setting up and managing these Khoupal8 are primarily
of infrastructural inadeCuacies, including power supply, telecom
connectivity and bandwidth, apart from the challenge of imparting skills to
the first time internet users in remote and inaccessible areas of rural %ndia.
0
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+s %ndia8s KAissan8 2ompany, %T2 has taken care to involve farmers in the
designing and management of the entire Khoupal8 initiative. The active
participation of farmers in this rural initiative has created a sense of
ownership in the proect among the farmers. They see the Khoupal8 as the
new age cooperative for all practical purposes.
This enthusiastic response from farmers has encouraged %T2 to plan for the
e'tension of the Khoupal8 initiative to altogether 1 states across %ndia
over the ne't few years. 3n the anvil are plans to channeli$e services related
to micro#credit, insurance, health and education through the same K
2houpal8 infrastructure.
%T28s trail#bla$ing answer to these problems is the houpal initiativeN the
single#largest information technology#based intervention by a corporate
entity in rural %ndia. Transforming the %ndian farmer into a progressive
knowledge#seeking citi$en. &nriching the farmer with knowledgeN moving
him to a new order of empowerment.
houpal delivers real#time information and modified knowledge to
improve the farmers decision#making ability, thereby better aligning farm
output to market demandsN securing better Cuality, productivity and
improved price discovery. The model helps total demand in the nature of an
effective producers co#operative, in the process facilitating access to higher
Cuality farm inputs at lower costs for the farmer.
The houpal initiative also creates a direct marketing channel,
eliminating wasteful intermediation and multiple handling, thus reducing
transaction costs and making logistics efficient. The houpal proect is
already benefiting over . million farmers. 3ver the ne't decade, the
2houpal network will cover over 100,000 villages, representing 1E4th of
rural %ndia, and create more than 10 million e#farmers.
1
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A Digital Transfor#ation3
%T2 began the silent e#evolution of rural %ndia with 6oya growers in the
villages of Madhya (radesh. @or the first time, the stereotype image of the
farmer on his bullock cart made way for the e#farmer, browsing the
2houpal website. @armers now log on to the site through %nternet kiosks in
their villages to order high Cuality agri#inputs, get information on best
farming practices, e'isting market prices for their crops at home and abroad
and the weather forecast all in the local language.
%n the very first full season of houpal operations in Madhya (radesh,
6oya farmers sold nearly 0,000 tons of their produce through the
6oyachoupal %nternet platform, which has more than doubled since then.
The result marks the beginning of a transparent and cost#effective marketing
channel. Bringing prosperity to the farmers doorstep.
4ining $ar#ers to Re#unerati8e Marets3
@armers grow wheat across several agro#climatic $ones, producing grains of
varying grades. Though these grades had the potential to meet diverse
consumer preferences, the benefit never trickled down to the farmers,
because all varieties were aggregated as one average Cuality in the mandis.
&nter %T2s houpal intervention.
The houpal site is now helping the farmers discover the best price for
their Cuality at the village itself. The site also provides farmers with
speciali$ed knowledge for customi$ing their produce to the right consumer
segments. The new storage and handling system preserves the identity of
different varieties right through the farm#gate to dinner#plate supply chain.
&ncouraging the farmers to raise their Cuality standards and attract higher
prices.
*
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4i8estoc de8elo"#ent ser8ices at the far#er9s doorste"3
S#,ial + Far F#re%tr0
7 at a glan,e
Agena "#r t*e net
De,ae
Milestones
$#en,eent #"
initiati3e- 1
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a desirable < has serious implications for the rural poor. @orests and
common property resources constitute as much as *0< or more of the total
income source of such households. The main plan of %T28s forestry proects
is the building of grassroots capacities to initiate a virtuous cycle of
sustainable development. %T2 provides a comprehensive package of
support and e'tension services to farmers loans, land development,
planting of saplings, plantation maintenance, and marketing and funds
management.
?. PRO5E$T SHAKTI VS E&$HOUPAL
?.1 PRO5E$T SHAKTI
I: Rural distribution3
(roect 6hakti is for the rural distribution of products of !>F it is an
activity which ease the marketing E distribution channel of the !>F
products through the )ural market. %t also generate E create awareness
among the )ural masses about the product varieties of !>F.
II: Process *ased ;$MG:3
The products here are processed in the factories and than passed to the
consumers i.e. @ast Moving 2onsumers :oods ;@M2:=.6hakti is a process
based i.e. consumers are getting the finished goods directly to consume that
to at the affordable price.
4.1 (roect 6hakti
4.* houpal
4. 6hakti vEs houpal
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III: Directl' #o8es to final consu#er3
%n 6hakti proect rural women are targeted to market !>F8s products .6o,
!>F through 6hakti (roect directly moves to the final consumers and there
is no middleman to interrupt the distribution chain and it also got the
success.
I: *eneficial to rural "o"ulation3
The proect 6hakti is very beneficial to the rural population as it creates
awareness among the rural women in their areas who knows all the %n and
3uts of her home. 6o,
%ndirectly whole rural
population is benefited.
?.2 E&$HOUPAL
I: Procure#ent ,rientation3
houpal is proected towards the farmers, as they are helped through the
information, which they get from the sanchalak of the houpal. %n this
system grains and food items are purchased by %T2 co. directly from the
farmers, as farmers are informed about all farming items like seeds,
pesticides etc. and they are suggested some productive crops etc.
II: Agro+based3
houpal is totally agro based as %T2 whole production system is based on
agricultural goods i.e. Tobacco, 2otton, Jheat, and Jood pulp etc. !ence
houpal helps to get proper Cuantity and Cuality agro raw materials to its
2ompany.
III: Mo8ing in both wa's3
houpal is the one way to create awareness among farmers by giving
them all the latest farming techniCues and all the recent agro research which
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are very useful to them .%n this way it helps the consumers i.e. farmers and
%n another way through houpal the company is purchasing the food
grains for processing their finished goods.
I: *eneficial to $ar#ers3
houpal has the dual reachness as it helps the farmers by giving them
information about the hybrid seeds and fertili$ers and farming techniCues
and also how to increase the productivity on the other hand. %t also helps
farmers by giving them information about the standard rates of food grains
among the mandis in %ndia. !ence, houpal is very beneficial to thefarmers.
?.4 SHAKTI VS E&$HOUPAL
VS
%T2 and !>F are the top shots of the %ndian @M2: industry both of them
have variety of products and are at a saturation point with their products in
urban areas now they have shifted towards the huge untapped rural area
both of them have come up with a proect to capture the rural mass land.
The proect 6hakti started by !>F and choupal by %T2. houpal and
(roect 6hakti are locked in a fascinating race to pry open %ndias rural
heartland. The real %ndia, they say, lives in the villages # 47,4 villages, to
be precise. This is where the fortunes of many of %ndias biggest
corporations are likely to be shaped. %T2s houpal and !>Fs (roect
6hakti is significant. @or the uninitiated, (roect 6hakti is !>Fs smart way
to use self#help groups to directly cater to 1 million homes every month in
villages where traditional distribution systems cannot hope to enter.
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2houpal is %T2s much#feted business model to build a trading platform
with rural %ndia that already touches million farmers.
3ver the years, !>F has defined what competitive marketing is all about.
%ts distribution system has been the envy of every other marketing
organi$ation in the country. Fever !ouse in downtown Mumbai has been
2orporate %ndias unofficial >niversity of 2&3s, making it one of the most
powerful corporate alumni networks in the country. (roect 6hakti today
covers 40,000 villages across 1* states. %t provides livelihood to 1,00
6hakti dealers, almost all of them poor women. By this year#end, it will
have another 11,00 women entrepreneurs hawking Fever products to
village folk.
The proect now contributes a little more than )s 100 crores to the Fever
topline, and is yet to break even. By the ne't year#end, !>F believes
6haktis contribution could double and the proect could achieve cash break#
even.
Then theres %T2s houpal. %ts the second largest agri products e'porter
from %ndia. Thanks to its ,00 2houpal across si' states, the company
sources agri products worth almost )s 70 crore from 1 lakh farmers. By
*010, it plans to e'tend coverage to 1.1 crore farmers across 1 lakh villages
in 1 states. But %T2 is now looking beyond mere procurement # it has
begun using its network of 2houpal and warehouses for a two#way trading
process that takes products and services to the farmers. By ne't March, it
hopes to build 0 2houpal 6agars, its large rural shopping comple'es replete
with supermarket, petrol pump, bank, healthcare and training facilities, and
more.
%n 1999, as a part of (roect Millennium, !>F invited suggestions from
employees on how it could keep growing. %deas that came in were put into
several buckets. 3ne of them was loosely termed as rural. 6omeone
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suggested looking at alternative channels such as the one used by :rameen
Bank in Bangladesh. There, the micro#credit body had boosted savings
among poor women through self#help groups ;6!:s=, and then helped them
convert those savings into micro#enterprises.
%t was an idea whose time had come. The 6!: movement had been
gathering momentum in %ndia. +t the same time, despite being the largest
consumer product marketer, !>Fs much#admired distribution machinery
was directly servicing less than a fifth of %ndias villages. This was the
fallout of uneconomical last#mile logistics. The business generated by
retailers in these half a million villages was less than that incurred by the
company to service them. That meant Fever could not reach out to nearly 75
per cent of %ndias villages, which have a population of *,000 or less.
)etailers in these villages relied on the wholesale channel # easily one of the
most cost#effective mass distribution systems. 6o products did get through,
but only fast#moving brands like Fife buoy. Jithout a direct distribution
system in place, Fever knew that only a handful of its brands would reach
rural shop shelves. 2ould a new delivery channel be developed around
6!:sQ %t was an idea no one had tried before.
%n contrast, houpal was the child of desperate brainstorming. %n 1999,
%T2 was on the verge of closing its international business division ;%B-=.
Jhile sourcing 6oya in Madhya (radesh, the %B- team used to see farmers
lug their produce in trailers to the local mandi. Then, %T2 would buy the
produce from the mandi and bring it to its processing hub. ?ot only did %T2
end up paying each intermediary at the mandi, but the farmers also got
cheated at the mandi. The insight for the houpal idea came from a need
to re#engineer this supply chain so that both the farmer and %T2 gained.
!>F outsourced almost all the groundwork to partners like Mart, a rural
marketing consultancy. They negotiated with state governments, local
micro#credit organisations, and 6!:s. %T2, on the other hand, did the
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spadework itself and decided to test its model at the large 6oya#producing
belt in Madhya (radesh.
The results, too, were remarkably different !>F ended up with a model
that followed a linear, hierarchical approach, while %T2 chose a more
unconventional and comple' format. The roles of the key participants in the
two models were sharply different. !>F entered ?algonda with a simple
plan # to sell through 6!:s. %t would train their members in selling. 6ell
them its merchandise. +nd then, the members would recoup their
investments by selling to their fellow villagers, and possibly to #/ nearby
villages. %n the first phase, it started with 100.
%T2 also went for a local representative. %t would appoint a farmer as the
sanchalak for a clutch of villages. By making a local the face of the
company, %T2 could easily build credibility. +n %nternet kiosk # with a (2, a
"6+T connection and a printer # would be set up at the sanchalak home.
&veryday, %T2 would transmit the prevailing mandi prices and the price at
which it would buy 6oya at its nearby processing hub to the sanchalak via
the %nternet. %nstead of being forced to travel all the way to the mandi for
finding out the price, the farmers now had a choice sell their produce to the
mandi or %T2, or hold till prices improved.
@armers at %T2s hub in !ardoi being briefed about insurance. ?otice the
(hilips ad # the company is riding the houpal network to sell its own
wares. 6o, at %T2, the sanchalak was the critical person who would have to
figure out what the community needed. But how was he an active
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participantQ Jell, he would not make any money disseminating all the
information. !e would make money only when there were transactions. This
ensured that the sanchalak would keep %T2 on its toes. !e would say
G>nless you deliver value in my village, % wont make any money.G
To ensure that these ideas spread from sanchalak to sanchalak, %T2
organi$ed regular community gatherings. %n contrast, !>F had no formal
mechanism for spotting ideas from ground up. %T2 was also testing the
robustness of its sourcing business by running small pilots in three different
parts of the country, in commodities as diverse as coffee, aCua and 6oya. To
make it work, the companys employees sometimes had to even beef up the
local telecom infrastructure on their own.
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The two firms had different comfort levels with uncertainty. !>F wanted to
see the proof of a concept that would be sustainable and scalable across
%ndia. 6o, for two years, the new business team at ?algonda fine#tuned the
model to reach those goals. %n contrast, the team at %T2 was willing to roll
out a model once they felt they had got 40 per cent of it right. 6o, while %T2
was going though the paces of failure and success, !>F stayed in ?algonda.
The ?algonda proects beginning was unnerving. !alf of the 100 women
who signed up Cuit in the first si' months. Most were not used to running
businesses. + former !>F employee who worked on the ?algonda pilot
remembers, the women were unwilling to sell to their fellow villagers at a
profit.
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6i' months down the line, the company sharpened its hiring strategy. +t
first, 6hakti had attracted lots of women, who were keen but couldnt
commit enough time. 6o !>F began to screen them out.
+lso, when the proect was test#launched, it was not clear if (roect 6hakti
would work as a retail distribution model or a home#to#home one.
+ccording to the former idea, each village would have *# retail outlets, so
between five villages there would be about 10#1 outlets. 3ver time, !>F
reali$ed that a combination of the two approaches would work better. 6o the
women, guided by the company representative ;called rural sales promoters,
or )6(s=, would sell both door#to#door ;at M)(= as well as to retailers ;at a
discount typically given out by distributors=. They would pocket different
margins for each different sale. The shopkeepers didnt feel threatened
because these women werent undercutting the M)(N also, the stocks would
come to their doorstep.
The company gained too. &arlier, retailers used to stock only the faster
moving items like Fifebuoy and )e'onaN now, by going home to home,
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!>F could ensure that a larger range was stocked. By the end of *00*, the
company had a model that would work in villages with a population over
1,000. Jith that knowledge, it began scaling up. By the end of this year, the
company will have *,000 6hakti dealers.
Three years ago, the company was present in 100,000 villages. By the end
of *00, it will be in another 100,000 villages. %n another five years, it will
be in another 100,000. This is perhaps the biggest increase in !>Fs
coverage in the last many decades.G
?ow, %T2 began hiring for houpal, it picked up graduates from the
agricultural colleges, knowing that they would be less likely to shun rural
%ndia. +fter Madhya (radesh, %T2 took houpal to >ttar (radesh. ?ow,
its opening 4#5 new 2houpal a day. But the process was anything but
smooth when it began.
%t is in this regard, %T2s houpal scores over !>Fs (roect 6hakti. %T2
employs both pull and push strategy. The push strategy that %T2 adopts is
the plan to introduce healthcare products to the rural market.
The pull strategy is that the farmers can get the reCuired information about
the global market at any time ;This has been facilitated by the introduction
of houpal=.
%T2 procures crops from the rural farmers besides providing market
information to the rural people so that, both the parties have a win#win
situation. Jhereas !>Fs (roect 6hakti adopted the push strategy alone by
reinventing their distribution in rural areas. %t does not seem to have any
proposal to improve the purchasing power of the rural people.
3ne of the specialties of %T2s houpal is that the middlemens role has
been redefined as the consumer friendly middlemen. %t is this person, who
e'plains the information provided by the kiosks to the rural illiterate tech
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averse farmers. Thus, %T2 has taken the advantage of trust, which the
middleman has in their traditional trading.
%T2s houpal has raised the rural peoples purchasing power to an e'tent
possible with re#intermediation of obs. This can be understood from the
following table #
$#%t In,urre !0 t*e Farer
$#%t Traiti#nal Mani E&$*#u)al
Trolley @reight 1*0 1*0
Fabour 0 ?ilMiddlemen 10 ?il
!andling Foss 0 ?il
T#tal 4'( 12(
$#%t In,urre !0 t*e Pr#,e%%#r
$#%t Traiti#nal Mani E&$*#u)al
2ommission 100 0
:unny Bags 5 5
@reight to factory 1*0 ?il
6torage /0 /0
-isbursement 2ost ?il 0
T#tal 44: 21:
%n the final reckoning, both companies have managed to create a chain that
goes all the way down to village communities. The challenge now is to
leverage this better.
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'. HUL AND IT$ FOR RURAL INDIA
AND
A% )r#%)erit0 3i%it% rural Inia= in,#e% kee) ri%ing ,#)elling
,#)anie% t# re"#,u% t*eir arketing %trategie%.
@or Cuite some time now, the lure of rural %ndia been the subect of animated
discussion in corporate suites. +nd with good reason too. Jith urban
markets getting saturated for several categories of consumer goods and with
rising rural incomes, marketing e'ecutives are fanning out and discovering
the strengths of the large rural markets as they try to enlarge their markets.
Today, the idea has grown out of its infancy and dominates discussions in
any corporate boardroom strategy session.
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+ survey by the ?ational 2ouncil for +pplied &conomic )esearch, %ndias
premier economic research entity, recently confirmed that rise in rural
incomes is keeping pace with urban incomes. @rom to 7 per cent of the
average urban income in 199/#9, the average rural income has gone up to
4 to 4/ per cent by *001#0* and touched almost 44 per cent in *00/#0.
The rural middle class is growing at 1* per cent against the 1 per cent
growth of its urban counterpart.
!igher rural incomes have meant larger markets. +lready, the rural tilt is
beginning to show. + study by the 2hennai#based @rancis Aanoi Marketing
(lanning 6ervices says that the rural market for @M2: is worth D1/./
billion, far ahead of the market for tractors and agri#inputs, which is
estimated at D10 billion.
)ural %ndia also accounts for sales of D1.5 billion for cars, scooters and
bikes and over one billion dollars of durables. %n total, that represents a
market worth a whopping D*5 billion.
!industan Fever Ftd, the D*. billion %ndian subsidiary of >nilever, the
countrys largest @M2: 2ompany, has also got on the bandwagon. %ts
(roect 6hakti uses self#help groups across the country to push Fever
products deeper into the hinterland. %ts four#pronged programme creates
income#generating capabilities for underprivileged rural womenN improves
rural Cuality of life by spreading awareness of best practices in health and
hygieneN empowers the rural community by creating access to relevant
information through community portals and it also works with ?:3s to
spread literacy.
There are currently over 1,000 6hakti entrepreneurs, most of them women,
in 41,/00 villages across 1* states. By the end of *010, 6hakti aims to have
100,000 6hakti entrepreneurs covering 00,000 of %ndia8s 4/0,000 villages,
touching the lives of over 400 million people. Jith such an emphasis on
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rural marketing, consumption patterns are changing and it signals a change
in the regulatory environment. "ertical integration of the food market from
farm to firm to fork becomes the best way to achieve efficiency and serve
the interest of every stakeholder in the chain the farmer, the processor,
the retailer and the consumer.
The idea of choupal, a rural initiative by %T2, has been termed path
breaking. %n 1999, 6 6ivakumar, head of the %T2s agri#business division,
approached %T2 chairman, Oogesh -eveshwar, for a D11,000 grant to test
an idea. 6ivakumar and his team, while sourcing 6oya in Madhya (radesh,
had watched farmers lug their produce in trailers to local daily markets,
often to sell the produce even if the price wasnt attractive.
%T2 used to buy the 6oya from intermediaries and bring it to their hubs. ?ot
only did %T2 end up paying more but also the farmers got less. 6ivakumar
felt that there was a need to re#engineer this supply chain so that both the
farmers and %T2 gained. The solution, he felt, lay in information and
communication technology.
Today, %T2s e#choupal network has reached over . million farmers and is
e'panding into 0 villages a day, making it one of rural %ndias most
ambitious hori$on#widening initiatives. Choupal is the !indi word for the
village sCuare ;normally under a tree=, where elders meet to discuss matters
of importance.
& stands for a computer with an %nternet connection and is the farmers
window to the world outside his village.
%T2 installs a computer with a "6+T %nternet connection in selected
villages. + local educated farmer called sanchalak, or conductor, operates
the computer on behalf of %T2. !e is not paid for his services but gets a
commission on all transactions. +t the e#choupal, farmers are offered
services like daily weather forecasts and price of various crops in the local
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market free of cost. They can download information about farming methods
specific to each crop and region through an arrangement with agriculture
universities. They can buy seeds, fertili$ers, pesticides and even bicycles,
tractor and insurance policies. 3ver companies currently sell their
products through the network.
Malls are also on the agenda of %T2, which has its chain of retail outlets for
its apparel line Jills Fifestyle. %t plans to set up almost *00 of them by *010
in various formats and with merchandise assortments designed for local
preferences. These malls will act as a hub for both branded and locally
produced goods, entertainment options, education, and healthcare and farm
advisories.
The malls will also generate rural employment. %T2s rural malls will be
called 2houpal 6agars an e'tension of its famed e#choupal proect. By
March *004, the company hopes to get 0 2houpal 6agars going, replete
with shopping comple'es, petrol pump, healthcare, training facilities and
more.
%T2s $eal reflects the dominant trend in corporate %ndia to enter every area
from contract farming to rural malls, seed research to medicinal plants and
food processing to fruit e'ports. There is a growing perception that such is
the scope of rural markets that what has been done so far amounts to
scratching the surface. +fter all, as they say, %ndia lives in its villages
47,4 villages, to be precise. %t appears that the fortunes of %ndias largest
corporations, and several M?2s, are about to be shaped there.
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B. S@OT ANAL9SIS
STREN8HTS- &
2heap Fabour 2ost
!uman )esources are plenty
?ot tapped by the 2orporates
+griculture# Main 3ccupation
Farge number of consumers
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Farge number of producers
-iverse agro climate conditions
@EAKNESSES- &
%nformation asymmetry
Fow literacy rate
Fow purchasing power
%nadeCuate infrastructure
Fack of %nternet 2onnectivity
!igh cost and non availability of 2redit
@ragmented land holdings
OPPORTUNITIES- &
>ntapped )esources
Technology +dvancement
&nabling rural people to participate in global market
2an generate more employment opportunities
?ear absence of rural industries
Fow cost of production
&'istence of )eference groups
THREATS- &
)ural people8s perception towards technology
%ntegration of scattered population
2loser to mother nature
2onservative society
Migration to urban areas
-ifferent languages
(oliti$ation of rural society
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T*e "uture lie% it* t*#%e ,#)anie% *# %ee t*e )##r a%
t*eir ,u%t#er%.G
lhasnagar and is developing slowly and gradually.
My main aim for having a survey in a rural area was to know about the
reasons that contribute to the improvement of economic growth and
enhancement of agricultural income so as to reduce poverty in the rural
areas.
+s % had to make a proect on the two companies i.e. !>F and %T2, %
inCuired much about their marketing strategies and their development
policies followed in that area. @or this purpose % interviewed many )etailers
and their 2ustomers to know clearly in what ways !>F and %T2 are helping
them to live a better and comfortable life.
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!>F and %T2 have made a successful approach in designing the networking
for the distribution or marketing of their products in this rural area i.e.
?eral.
?eral has Cuite a large population and hence the demand of rural market is
higher than urban markets. +s a result of this both the companies adopt
different strategies to increase their market share in the rural area. 6o there
is a huge potential which will be very profitable to both these companies. +s
from the analysis point of view % observed that at each and every stage both
!>F and %T2 try to empower rural population.
HUL AND IT$ IN NERAL
+fter the collection of information from about 0 people in ?eral, % have
classified all the information as per the / (s of Marketing i.e. (roduct, (rice,
(romotion and (eople.
PRODU$T- &
?eral being a rural area does not have a large variety of products as in the
urban markets. The people in ?eral buy any product looking after its Cuality
and price. Most of the people here do not stick to a particular brand of
product but keep on changing with the entrance of new brands and with a
price, which is suitable for them. "ery less number of people in ?eral are
brand loyal and use every product of a particular brand. + large number of
people here use the products of !>F and %T2 and consider them the best of
the products as compared to the other local brands.
@ollowing is the list of some of the products of !>F and %T2 that are
consumed by the people in ?eral
PRODU$TS OF HUL PRODU$TS OF IT$6urf 6taples like +ashirvaad +tta
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6un 6ilk 6hampoo Biscuits like 6unfeast
6oaps like Fifebuoy, Fu',
!amam, (ears
2igarettes
Ta Tea and Bru 2offee ?otebooksAwality Jalls %ce#cream 2andies like Mint#3
Toothpastes like 2lose#up,
(epsodent
Mangaldeep +garbattis
ams Fike Aissan Mangaldeep 6afety Matches
Branded 6taples Fike
+nnapurna +tta
Tomato#based products like
Aissan 6auce
PRI$E- &
The people in ?eral are price#conscious. Most of the people buy the
products that have a low price without considering its brand. !ere there are
also people who buy products considering its Cuality along with a low price.
The products of !>F and %T2 have a good volume of sale but only small
packs or sachets, as they are priced low as compared to large packs.
+s most of the products of !>F and %T2 are products of routine use, the
people in ?eral are ready to pay prices for such products because those
products fulfill the basic needs of people. Aeeping this in mind, !>F has
launched its products at a very reasonable price, which is affordable for
every consumer in the rural area.
PROMOTION- &
%n ?eral, the young and the educated are large in number and hence they are
the decision makers as they get an e'posure, attitudes and aspirations from
their counterparts in the urban areas. This helps the two companies# !>F
and %T2 to increase its sales through promotion of their products.
!>F had sent a van to show the demonstrations of its products like
detergents, which attracted a large mass of people and got a ump in the sale
of those products.
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There are many posters and wall paintings of the products of !>F and %T2
in ?eral. Fooking at them, many people buy their products at least once and
they become the regular users of that product.
The people also find many schemes offered by these two companies like
one on one free, buy two get one free, soap free with a pack of surf and
many more.
The media also influences people and they buy many products after looking
at the advertisements in television.
PEOPLE- &
SOUR$E OF
IN$OME
PER$ENTA8E OF
PEOPLE+:)%2>FT>)& /0 F and %T2 will soon be in the hearts of the people
as they are working hard in spreading their branches to each and every
rural market in %ndia.
1(. $ON$LUSION
!ere the rain gods still play havoc with one8s dreams. The dusty village path
winds past a cluster of slumbering cottages and leads one to a weekly rural
ba$aar or haats, brimming over with din, bustle and transaction. This is
where the real %ndia resides.
But things are changing fast now. Thanks to the increasing literacy level and
media e'plosion, people are becoming conscious about their lifestyles and
about their rights to live a better life. Brand consciousness is on the rise.
This, clubbed with increasing disposable income of rural households, has
made the rural consumer more demanding and choosier in his purchase
behaviour than ever before. +nd the dusky village damsel has now learned
to pine for a satin rose.
The rural %ndia offers a tremendous market potential. + mere one percent
increase in %ndia8s rural income translates to a mind#boggling )s 10,000
crores of buying power. ?early two#thirds of all middle#income households
in the country are in rural %ndia. +nd close to half of %ndia8s buying potential
lies in its villages. Thus for the