Product Strategies

The specific strategies, which can be employed to develop or modify the products

to targets the rural market, can be classified as follows:

1. Small unit packing: Given the low per capita income & purchasing habits of

the rural consumers, small unit packages stand a good chance of acceptance in

rural market. Single serve packets or sachets are enormously popular in India.

They allow consumers to buy only what they need, experiment with new

products, & conserve cash at the same time. This method has been tested by

products life shampoos, pickles, biscuits, Vicks cough drops in single tablets, tooth

paste, etc. Small packing stands a good chance of acceptance in rural markets.

The advantage is that the price is low and the rural consumer can easily afford it.

Also the Red Label Rs. 3.00 pack has more sales as compared to the large pack.

This is because it is very affordable for the lower income group with the deepest

market reach making easy access to the end user satisfying him. The small unit

packing will definitely attract a large number of rural consumers.

2. New product designs: Keeping in view the rural life style the manufacturer

and the marketing men can think in terms of new product designs. The rural

product usage environment is tough because of rough handling, rough roads &

frequent power fluctuations. Thus, all these environmental factors must be

considered while developing the products meant for rural audience.

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Nokia s 1100 model is a very good example of a customized model for rural

markets. Its design has been modified to protect it against rough usage in rural

environment; it is dust resistant & has a small torch light in view of the frequent

power cuts in rural India. It is also introduces messaging in Hindi language now, in

some of the economically priced models in order to cater to the semi-urban or

rural consumers. This is in real terms, thinking global & acting local.

3. Sturdy products: Sturdiness of a product is an important factor for rural

consumers. The product should be sturdy enough to stand rough handling,

transportation & storage. The experience of torch light dry battery cell

manufacturers supports this because the rural consumers preferred dry battery

cells which are heavier than the lighter ones. For them, heavier weight meant that

it has more over and durability. Sturdiness of a product either or appearance is an

important for the rural consumers.

4. Utility oriented products: The rural consumers are more concerned with

utility of the product and its appearance Philips India Ltd. Developed and

introduced a low cost medium wave receiver named BAHADUR during the early

seventies. Initially the sales were good but declined subsequently. On

investigation it was found that the rural consumer bought radios not only for

information and news but also for entertainment.

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5. Brand name: For identification, the rural consumers do give their own brand
name on the name of an item. The fertilizers companies normally use a logo on

the fertilizer bags though fertilizers have to be sold only on generic names. A

brand name or a logo is very important for a rural consumer for it can be easily

remembered. Many a time s rural consumers ask for peeli tikki in case of

conventional and detergent washing soap.

Nirma made a peeli tikki especially for those peeli tikki users who might have

experienced better cleanliness with the yellow colored bar as compared to the

blue one although the actual difference is only of the color. e.g.: Coca-Cola

targeted the whole Indian rural market with the positioning of Thanda Matlab

Coca-Cola advertisements because most of the villagers say when wanting a

drink refer to it as Thanda so Coca-cola used that word.

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Pricing strategies

1. Low cost/ cheap products: This follows from the product strategy. The

price can be kept low by low unit packaging s like paisa pack of tea, shampoo

sachets, vicks 5 grams tin, etc. this is a common strategy widely adopted by many

manufacturing and marketing concerns.

2. Refill packs / Reusable packaging: In urban areas most of the health

drinks are available. The containers can be put to multipurpose uses. Such

measures can a significant impact in the rural market.

For example, the rural people can efficiently reuse the plastic bottle of hair oil.
Similarly the packages of edible oil, tea, coffee, ghee etc can be reused. Pet jars

free with the Hasmukhrai and Co Tea, Ariel Super Compact.

3. Application of value engineering: in food industry, Soya protein is being

used instead of milk protein. Milk protein is expensive while Soya protein is

cheaper, but the nutrition content of both is the same. The basic aim is to reduce

the value of the product, so that a larger segment can afford it, thus, expanding

the market.

4. Large volume-low margins (Rapid or slow penetration strategy):

Marketers have to focus on generating large volumes & not big profit margins on

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individual products. If they price their product at a level which can lead to good

volumes, then they can still generate good returns on the capital employed.

5. Overall efficiency & passing on benefits to consumers: For rural

products, the strategy should be to cut down the production, distribution &

advertising costs & passing on these benefits to the customers to further increase

the turnover. Most often, it has been observed that advertising has less to do

with product sales in the rural areas. If an organization gets the price point right,

then it can work in rural market.

6. Low volume-low price strategy: This strategy of reducing prices by

reducing the package size in order to make it appear more affordable, is

delivering very good results for a large number of FMCG product categories, in
the rural markets of India. In categories where maintaining the price point is

extremely critical, this strategy is delivering very good results.

7. Ensuring price compliance: Rural retailers, most of the times, charges more

than the MRP. The manufacture has to ensure price compliance either through

promotional campaigns, as was done by Coca Cola, or by ensuring the availability

of products at the retail outlets directly.

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Promotion strategies

Customized promotional media & messages need to be developed by the

organizations to effectively target the rural market. The following strategies can

be considered while developing promotional campaigns for the rural markets:

1. Think Global Act Local

Rural population is diverse, but the commonalities of their ethos & simple

living habits need to be understood for advertising to succeed. For that, the

theme of the advertisement needs to revolve among universal themes,

such as family-love. But the context, storyline, language & idioms should be

such that the rural audience of different rural market segments can relate

to.

2. Think in Local Idiom

This is the need of the advertising professionals who can think like the rural

people. The only we can have insights like Thanda matlab Coca Cola .
There should be the use of language writers who understands the rural &

regional pulse better.

3. Simplicity & Clarity

All promotional messages targeted at rural audience need to be simple &

clear, which can be easily understood, & they should not include any

confusing elements. It is preferable that it has only a few propositions at a

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time. Bombarding rural consumers with too much, in less time can easily

confuse them & leave them bewildered. Promotional message should

highlight only the functional values of the product & explains how those

values can make the consumer s life even better & solve any of his

problems.

4. Narrative Story Style

The promotional message can be delivered in the form of an entertaining

story with a message depicting how the brand delivers larger good to the

family & society. The theme of the story line can be about how the product

can solve the problems of the rural consumers.

5. Choice of Brand Ambassador

Brand Ambassador for the rural markets need to be picked carefully as

urban successes might not get replicated in the rural markets. That is why

Govinda in the Mirinda as boosted the sales of the drink in the rural
markets. An organization might spend a lot of money in hiring a brand

ambassador only to find out later that it had little impact on the rural

consumer.

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Distribution Strategy

Many companies view the rural markets as great opportunity for expanding their

sales but find distribution as a major problem. Unfortunately, it is almost

impossible to transplant strategies which work successfully in urban markets onto

rural markets, namely, extensive retailing and sustained pull generation through

mass media advertising.

The road blocks to reach the rural customers are:

y Lack of adequate transport facilities.

y Large distances between villages.

Lack of pucca roads connecting villages to nearest townships.

y Lack of proper retail outlets

y Lack of mass media infrastructure.

The marketers were of the opinion that the villagers would come to nearby towns

and buy the products that they want. What has been found is that if we have to

serve the rural consumer we will have to take our products to him through the

channels that he is using and some innovative ways of getting to him.

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105

The following distribution strategies formulated for the rural category.

1. Coverage of villages with 2000 and above population: Ideally,

coverage of villages with up to 2000 and above population could be the break-

even point for a distribution setup. By doing so the percentage of villages covered

comes to only 10% of all the villages, but the rural population covered will be

substantial, to the extent of about 40 to 45 percent. With a distribution network

in about 55,000 villages, which have a population of 2000 persons & above each,

one can cover about 25 crores rural consumers. This strategy is good to begin

with & then subsequently, villages with lesser populations can be added.

2. Segmentation: the number of villages in India is huge & it is not viable to

contact & serve all villages directly. Therefore, companies or distributors can

carefully examine the market potential of different villages & target the villages

that can be served in a financially viable manner through an organized

distribution effort.

3. Use of co-operative societies: There are over 3 lacks co-operative

societies operating in rural areas for different purposes like marketing

cooperatives, farmer s service cooperatives and other multipurpose cooperatives.

These cooperatives have an arrangement for centralized procurement and

distribution through their respective state level federation. Such state level

federation can be motivated to procure and distribute consumables items and

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106

low value durable items to the members to the society for serving to the rural

consumers. Many of the societies extend credit to the members for purchases.

4. Utilization of public distributory system: The PDS in the country is fairly

well organized. The revamped PDS places more emphasis on reaching remote

rural areas like the hills and tribal s. The purpose of PDS is to make available

essential commodities like food grains, sugar, kerosene, edible oils and others to

the consumers at a reasonable price. The shops that distribute these commodities

are called fair price shops. These shops are run by the state civil Supplies

Corporation, co-operatives as well as private entrepreneurs. Here again there is

an arrangement for centralized procurement and distribution. The manufacturing

and marketing men should explore effective utilization of PDS.

5. Utilization of multipurpose distribution centers by petroleum/oil

companies: In order to cater to the rural areas the petroleum/oil companies

have evolved a concept of multipurpose distribution centers in rural areas. In

addition to petrol/diesel, lubricants, these outlets also stock consumables

agricultural inputs like fertilizers, pesticides and seeds. It is estimated that there

are about 450 such outlets in operation in the country. The rural consumer who

has tractors, oil-engine pump sets and mopeds frequent these outlets for their

requirement. These outlets can be profitably utilized for selling consumables and

durable items also.

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107

6. Distribution up to feeder markets/mandi towns: Keeping in view the

hierarchy of markets for the rural consumers, the feeder markets and mandi

towns offer excellent scope for distribution. The rural customers visit these towns

at regular intervals not only for selling the agricultural produce but also for

purchasing cloth, jewelry, hardware, radios, torch cells and other durables and

consumer products. From the feeder markets and mandi towns the stockiest or

wholesaler can arrange for distribution to the village shops in the interior places.

This distribution can be done by mopeds, cycles, bullock-carts, camelbacks etc.

depending upon the township.

7. Shandies/Haaths/Jathras/Melas: These are places where the rural

consumers congregate as a rule. While shandies/heaths are held a particular day

every week, Jathras and melas are held once or twice a year for longer durations.

They are normally timed with religious festivals. Such places attract large number

of itinerant merchants. Only temporary shops come up selling goods of all kinds.

It can be beneficial for companies to organize sales of their product at such

places. Promotion can be taken, as there will be ready captive audience. For

convincing the manufacturing and marketing man with regard to the importance

of these places from rural marketing point of view a visit to such places is

necessary. It is estimated that over 5,000 fairs are held in the country and the

estimated attendance is about 100 million rural consumers. Biggest fair Pushkar
Mela is estimated to attract over 10 million people. There are 50 such big rural

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fairs held in various parts of country, which attract urbanite also like

Mankanavillaku in Malappara in Kerela, Kumbh Mela at Hardwar in U.P. Periya

Kirthigai at Tiruparunkunaram in Tamil Nadu.

Merits:

y Convenience: The entire market can be related to large departmental

stores in cities, where the advantage is a one-stop shopping exercise. These

outlets crop up every week, providing consumers immense choice and

prices.

y Attractive: The weekend shopping is not only convenient but also

entertaining. The markets start early and will be over by lunch. Afterwards,

there will be entertainment. In respect of transactions, it is an attractive

place to those who want to buy second hand durables and to those who

prefer barter transactions. Further the freshness of the produce, buying in

bulk for, a week and the bargaining advantage attract the frugal and

weeklong hard working rural folk.

y Availability: It is a market for everyone and for everything. Household

goods, clothes, durables, jewellery, cattle, machinery, farming equipment,

raw materials and a host of products are available.

8. Agricultural Input Dealers: Fertilizers should be made available to the

farmers within the range of 4-5 km from their residence, as per the essential

commodities act. This is why there are about 2 lakh fertilizer dealers in the

country, both in cooperative & private sector. Example of Varana Nagar in

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Maharashtra proved an eye opener in this regard where the sugar and milk co-

operatives have totally changed the life style of people. The supermarket in

Varana Nagar caters exclusively to rural consumers. Similarly a co-operative

supermarket called Chintamani in Coimbatore (T.N) arranges free transit of rural

consumers to the supermarket of their purchases.

9. Joint distribution by Non-competing Companies: As the cost of

distributing the products in the rural market through distribution vans can be

unviable for a single company, different non-competing companies can come

together to jointly operate distribution vans for the rural market. This will enable

them to share the cost of operating the van & on account of the sharing of the

cost by four or five companies; the entire operation can become financially viable

for all the players.

10. Personal Selling Network: It is very successful distribution channel being

developed by companies like HUL. It adds a personal touch to the marketing, as

the salesmen are the resident of the village or community itself, making it easier

to sell the product & maximise sales for the company.

Rural Marketing: The Go Rural Mantra

“The destiny lies with those companies who see a bad as their customers.” – C. K. Prahalad

India is a nation of opposite cultures, languages as good as rituals. In these resources it has turn a
plea for manufacturers to compute their offerings according to a Indian market. With about 70%
of Indian race residing in farming areas a need of a hour for a marketers is perspicacious this
market.

Driven by immature revolution, farming population’s purchasing energy has grown

tremendously over a years. Accordingly farming direct for industrial as good as civic associated
products is additionally growing. In this context, a special marketing strategy, namely, rural
marketing has emerged. But often, farming marketing is confused with farming marketing.
While latter denotes marketing of furnish of a farming areas to a civic consumers or industrial
consumers, farming marketing involves delivering made or processed inputs or services to
farming producers or consumers.

What creates ‘Rural Markets’ attractive?

Importance of farming market can be substantiated by following attributes:

Population 742 million

Estimated annual distance of a farming market –

Rs. crores

FMCG

Rs 65000

Durables

Rs 5000

Agri-Inputs
Rs 45000

2/4 Wheelers

Rs 8000

.5bn worth FMCG products sole in farming India in 2009

of dual million BSNL mobile connections, 50% have been in tiny towns / villages.

MNC’s identical to Coca-Cola have attempted to customize their charity by introducing “chota-
coke” costing 5 rupees. Ironically nonetheless purchasing energy in farming India is flourishing
nonetheless associated infrastructure, identical to H2O & physical materialisation has not kept
gait with that. To strike this phenomenon, soaking appurtenance manufacturers have introduced
soaking machines which will keep operative even if there is no trickery of using H2O
nonetheless it’s an additional story which a little of these machines were used to shake spread as
good as hope for buttermilk.

Buying function of a farming consumer is debasing to sundry factors as good as is opposite from
civic consumers in most ways. Firstly infancy of farming consumers stay in a corner family as
good as most of a squeeze decisions have been taken by elders. Secondly miss of believe of
product use by roughly lettered race hinders market penetration, identical to Lux soap being
used in farming areas for soaking hair. Thirdly as good as a greatest plea in farming markets,
alternative than resources as good as mercantile condition, is a normal mindset to buy things
which have been according to their informative setup. Fourthly, being a closely weave
community, opinion-leadership plays a really critical purpose in squeeze decisions in farming
areas, creation broadside by announcement roughly redundant. Sarpanch is a single such
perspective personality who can change farming consumer’s squeeze decision. Idea Telecom
Company has used Abhishek Bacchan in a single of a advertisements shown as a sarpanch
usually to have a certain interest between a farming customers.

Strategies for Improving Rural Marketing

Considering a sourroundings in which Indian farming market operates as good as alternative

associated problems, need of a hour is to rise some-more in effect strategies for farming
marketing which would be in sync with farming physique. The strategies discussed here
nonetheless not zodiacally germane rely upon product characteristics, a targeted shred of a
farming market, a preference of a farming area as good as a mercantile condition.

 
Some of a standard characteristics which start a farming market segmentation have been land
land pattern, irrigation facilities, liberality of farmers, gathering pattern; brew of enterprise,
preparation levels, vicinity to cities/towns, sociological factors, function categories. Small as
good as extrinsic farmers, farming labourers as good as artisans form a largest shred in farming
market (about 2/3rd) where as abounding farmers consecrate about a single third of farming
market

1 New product designs

A tighten regard of farming domicile equipment indicates a significance of redesigning or

modifying products used up by farming population. The production as good as marketing
companies can consider in conditions of latest product designs identical to tiny packs (e.g.
sachets) privately meant for farming areas gripping their lifestyles in view.

2. Sturdy products

Sturdiness of a product is an critical cause for farming consumers. The product meant for
farming areas should be stout sufficient to mount severe doing as good as storage. Nokia 1100
has positioned itself in a identical manner.

3. Brand name

The farming consumers being worth for income business have been some-more endangered with
a focus of a products. Being often roughly literate, a code name and/or trademark which can be
simply remembered is really required for farming consumers

Pricing strategies

Pricing strategies have been really most related to product strategies. Some of these strategies
have been referred to here.

1. Low cost/cheap products

Pricing plan for farming market will mostly rely upon range for shortening cost of a product to
fit a farming incomes as good as during a same time not compromising with focus as good as
sturdiness of a product.

This is a usual plan being adopted during large by most production as good as marketing
companies. Price indicate can be kept low by tiny section packing.

2. Avoid worldly packing

Adopting cheaper nonetheless permanent & cultured wrapping can pierce down a cost, as it is
currently being finished in a box of biscuits. Some creation in wrapping record is really required
for farming markets.

3. Refill packs/reusable packaging

Such measures have a poignant stroke upon a farming market as it helps in shortening price.
Packaging element used should preferably lend itself for reuse. An preferred e.g. in this citation
can be a make-up of fertilizers. Now companies have proposed make-up fertilizers in LDPE or
HDPE sacks, which have been not usually breach explanation nonetheless additionally reusable
for horde of made during home chores.

4. Application of worth engineering

This is a technique which can be attempted to rise cheaper products by substituting a dear tender
element with a cheaper one, though sacrificing a peculiarity or organic potency of a product, for
e.g. in food industry, ‘soya protein is being used instead of divert protein. Milk protein is costly
whilst soya protein is cheaper nonetheless a nourishment worth is same. This technique yields
itself for focus in most engineering or product written areas so which a cost can be kept during
an affordable level.

Distribution strategies

Most manufacturers as good as marketing companies have placement agreement for encampment
with a race of during slightest 5000 people. While it is -essential to delineate specific strategies
for placement in farming areas, a characteristics of a product, a shelf hold up have to be kept in
mind. Distribution strategies which have been privately written for farming areas are: by
associated societies, open placement system, multi-purpose placement centers, placement up to
tributary markets/mandi towns shanties/hat/jathras/melas, farming submit dealers etc.

Promotion strategies

Mass media is a absolute middle of communication. It could be television, cinema, imitation

media, as good as radio. Other equates to of mass media accessible have been hoardings/wall
paintings, shanties/hats/melas, non-price competition, special campaigns etc. Besides these,
alternative mass media identical to palm bills as good as booklets, posters, stickers, banners of a
schemes etc.

The ‘Go Rural’ mantra is a need of a hour for most of a companies to tarry for a longer time in a
rival market scenario. For decades, MNCs have sole mutated products in India, a routine during
large famous as globalization. This plan worked pretty good with a some-more abundant civic
consumers whose function is rather identical to Western consumers. With flourishing farming
purchasing energy as good as a 3 times incomparable race than urban, companies will need to
rise suitable products for this market. The globalization or teenager alteration will not work as
farming consumers have been really different.
Rural marketing is an elaborating concept, as good as as a partial of any manage to buy has
outrageous daub means potential. Marketers have prolonged satisfied this opportunity.
Improvement in infrastructure as good as reach, guarantee a splendid destiny for those intending
to go rural.

With income levels taking flight farming consumers have been penetrating upon branded
products nowadays, so a market distance for such products as good as services seems to have
burgeoned. The farming race has shown a direction of wanting to pierce in to a state of light
urbanization in conditions of exposure, habits, lifestyles as good as lastly, expenditure patterns of
products as good as services.

By 2012 it is approaching which each encampment will be continuous by an all continue road,
each encampment will have internet connectivity, as good as roughly each home will have
physical materialisation as good as retain a mobile phone. This poignant alleviation in farming
infrastructure joined with cultivation reforms already underneath approach you can design
farming markets to strech inflexion point. This will lead to an blast in direct a approach it
happened in a civic markets in a midst 90s as a outcome of easy consumer finance, a bang in a IT
zone as good as high enlarge in corporate salaries. Companies have been not expecting this bang
as good as most will be taken by warn when it happens.
Coke’s new strategy in India
 

Business Strategy – India – Training – Retailing – November 2008

With slowdown in developed markets, companies like PepsiCo and Coca-Cola are looking at
emerging markets like India and China for growth. PepsiCo is aiming to triple its businesses in
India over the next five years (and also setting up a new leadership structure in India). The Coca-
Cola Company (Coke), the world’s largest nonalcoholic beverage company, is not one to be left
behind. Coke has a new strategy and has renewed its focus on semi-urban and rural markets in
India.

Market Focus – Targeting rural India

The soft drink consumption market in India is mainly concentrated in urban cities. Even,
market research data suggests that consumers in urban cities spend ten times more than
consumers in semi-urban and rural markets. However, Coca-Cola has renewed its focus on the
rural market in India and believes there is huge opportunity with vast growth potential in these
markets. Coke is targeting small towns (tier II and III towns like Agra, Bilaspur and Lucknow)
and rural markets in India.

The ‘parivartan’ program – Training small town retailers

Coke’s new strategy involves training retailers (around 6,000 of them) in a program launched by
the Coca-Cola University. [In 2007, the company launched Coca-Cola University — a virtual,
global university for all learning and capability-building activities.]

The company calls this the “parivartan” program (meaning “Change” in English). Shop owners
(traditional retailers) are given training on displaying and stocking products well. The goal of the
innovative training program is to provide traditional Indian retailers with the skills, tools and
techniques required to succeed in a constantly changing retail scenario. Presentations (including
audio/visual technology) in local Hindi language help small retailers (with stores less than 200
square feet in average size) to better understand the concepts involved. Each retailer also
receives a Coca-Cola “Certified Retailer” certificate at the conclusion of the program.

Adapting to local culture and taste

Last year, PepsiCo set up a research facility in India. Last month, Coke too set up an R&D
faculty in India to develop beverages that suit local taste and increase focus on localizing its
portfolio of beverages. Earlier, Coca-Cola India had been outsourcing all R&D functions from
its facility in Shanghai. Some examples of local flavors include Maaza aam panna by Coca-Cola
and Pepsi has locally-produced flavors under its Tropicana juice brand (with nimbu pani (lemon
water) in the pipeline).

Moving from a price strategy to stepping up distribution

In the past (in 2002-03), Coke had already targeted rural consumers by bringing down the entry
price (Rs 5 a bottle) for its product. Now, it has stepped up distribution of its 200-ml (priced at
Rs 7 and Rs 8 ) returnable-glass-bottles.

Coca Cola India's Thirst for the Rural

Market

"We want to be the Hindustan Lever1 of the Indian beverage business."

- Sanjeev Gupta, Deputy President – Coca-Cola India in May 2002.2

"The rural market is a significant part of our marketing strategy which enables us to help

the consumer link with our product."

- Sanjeev Gupta, Marketing Director – Cola-Cola India, in August 1995.3

'Thanda' Goes Rural

In early 2002, Coca-Cola India (CCI) (Refer Exhibit I for information about CCI)

launched a new advertisement campaign featuring leading bollywood actor – Aamir

Khan.

The advertisement with the tag line – 'Thanda Matlab Coca-

Cola4' was targeted at rural and semi-urban consumers.

According to company sources, the idea was to position Coca-

Cola as a generic brand for cold drinks. The campaign was

launched to support CCI's rural marketing initiatives. CCI

began focusing on the rural market in the early 2000s in order

to increase volumes.

This decision was not surprising, given the huge size of the

untapped rural market in India (Refer Exhibit II to learn about

the rural market in India). With flat sales in the urban areas,

it was clear that CCI would have to shift its focus to the rural

market. Nantoo Banerjee, spokeswoman – CCI, said, "The real

market in India is in the rural areas. If you can crack it, there is

tremendous potential."5

However, the poor rural infrastructure and consumption habits that are very different

from those of urban people were two major obstacles to cracking the rural market for

CCI. Because of the erratic power supply most grocers in rural areas did not stock cold

drinks.

Coca Cola India's Thirst for the Rural Market - Next Page >>>
1] Indian arm of FMCG major Unilever. HLL was credited with pioneering rural market

initiatives in India with its Project

Bharat (1988) and Project Shakti (2002). The company boasts of the largest rural

distribution network and presence in

India.

2] Kripalani, Manjeet, Rural India, Have a Coke, BusinessWeek, May 27, 2002.

3] Guha Ray, Shantanu, The Great Rural Bazaar, www.rediff.com, August 28, 1995.

4] Cool drink means – Coca Cola.

5] Bailay, Rasul, Small Packets, Big Business, Far Eastern Economic Review, January

23, 2003.

Thanda' Goes Rural Contd...

Also, people in rural areas had a preference for traditional cold beverages such as 'lassi'6

and lemon juice. Further, the price of the beverage was also a major factor for the rural

consumer.

CCI's Rural Marketing Strategy

CCI's rural marketing strategy was based on three A's – Availability, Affordability and

Acceptability. The first 'A' – Availability emphasized on the availability of the product to
the customer; the second 'A' - Affordability focused on product pricing, and the third 'A'-

Acceptability focused on convincing the customer to buy the product.

Availability

Once CCI entered the rural market, it focused on strengthening

its distribution network there. It realized that the centralized

distribution system used by the company in the urban areas

would not be suitable for rural areas.

In the centralized distribution system, the product was

transported directly from the bottling plants to retailers (Refer

Figure I).

However, CCI realized that this distribution system would not

work in rural markets, as taking stock directly from bottling

plants to retail stores would be very costly due to the long

distances to be covered.

The company instead opted for a hub and spoke distribution system (Refer Figure II).

Under the hub and spoke distribution system, stock was transported from the bottling

plants to hubs and then from hubs, the stock was transported to spokes which were

situated in small towns. These spokes fed the retailers catering to the demand in rural

areas. CCI not only changed its distribution model, it also changed the type of vehicles

used for transportation. The company used large trucks for transporting stock from
bottling plants to hubs and medium commercial vehicles transported the stock from

the hubs to spokes. For transporting stock from spokes to village retailers the company

utilized auto rickshaws and cycles.

Coca Cola India's Thirst for the Rural Market - Next Page >>>

6] Lassi is a homemade drink made by blending thick curd with sugar or salt.

Availability Contd...

Commenting on the transportation of stock in rural markets, a company spokesperson

said, "We use all possible means of transport that range from trucks, auto rickshaws,

cycle rickshaws and hand carts to even camel carts in Rajasthan and mules in the hilly

areas, to cart our products from the nearest hub."7 In late 2002, CCI made an additional

investment of Rs 7 million (Rs 5 million from the company and Rs 2 million from the

company's bottlers) to meet rural demand. By March 2003, the company had added 25

production lines and doubled its glass and PET bottle capacity8. Further it also distributed

around 2,00,000 refrigerators to its rural retailers. It also purchased 5,000 new trucks and

auto rickshaws for boosting its rural distribution. Through its rural distribution initiatives,

CCI was able to increase its presence in rural areas from a coverage of 81,383 villages

in 2001 to 1,58,342 villages in August 2003. Apart from strengthening its distribution

network, CCI also focused on pricing in rural market.

Affordability
A survey conducted by CCI in 2001 revealed that 300 ml

bottles were not popular with rural and semi-urban residents

where two persons often shared a 300 ml bottle.

It was also found that the price of Rs10/- per bottle was

considered too high by rural consumers. For these reasons,

CCI decided to make some changes in the size of its bottles

and pricing to win over consumers in the rural market.

In 2002, CCI launched 200 ml bottles (Chota Coke)9 priced

at Rs 5. CCI announced that it would push the 200 ml bottles

more in rural areas, as the rural market was very price-

sensitive.

Coca Cola India's Thirst for the Rural Market - Next Page >>>

7] Shashidhar, Ajit, Colas' Countryside Crusade, The Hindu Business Line – Catalyst,

July 3, 2003.

8] Apart from the rural markets, CCI also began to focus on the home segment, by

introducing – 1 litre, 1.5 and 2 litre

PET bottles.

9] Small Coke
Coca Cola India's Thirst for the Rural

Market

<< Previous

Affordability Contd...

It was widely felt that the 200 ml bottles priced at Rs. 5 would increase the rate of

consumption in rural India. Reports put the annual per capita consumption of bottled

beverages in rural areas at one bottle as compared to 6 bottles in urban areas. The 200

ml bottles priced at Rs. 5 would also make CCI competitive against local brands in the

unorganized sector. It was reported that in the states of Rajasthan and Gujarat the local

cola brands such as Choice and Tikli cost only half the price offered by CCI, which gave

them the advantage in garnering the major market share before CCI came out with Chota

Coke. CCI also targeted the rural consumer aggressively in its marketing campaigns,

which were aimed at increasing awareness of its brands in rural areas.

Acceptability

The initiatives of CCI in distribution and pricing were

supported by extensive marketing in the mass media as well as

through outdoor advertising. The company put up hoardings

in villages and painted the name Coca Cola on the compounds

of the residences in the villages. Further, CCI also participated

in the weekly mandies10 by setting up temporary retail outlets,

and also took part in the annual haats11 and fairs - major

sources of business activity and entertainment in rural India.

CCI also launched television commercials (TVCs) targeted

at rural consumers. In order to reach more rural consumers,

CCI increased its ad-spend on Doordarshan.12 The company

ensured that all its rural marketing initiatives were well-

supported by TVCs.

When CCI launched Chota Coke in 2002 priced at Rs. 5, it bought out a commercial

featuring Bollywood actor Aamir Khan to communicate the message of the price cut and

the launch of 200 ml bottles to the rural consumers. The commercial was shot in a rural

setting. In the summer of 2003, CCI came up with a new commercial featuring Aamir

Khan, to further strengthen the Coca-Cola brand image among rural consumers.

Coca Cola India's Thirst for the Rural Market - Next Page >>>

10] Weekly fairs where villagers gather and sell their produce

11] Annual exhibitions, conducted during festival season.

12] State-owned broadcaster in India. According to reports it reaches around 70 million

homes.

Acceptability Contd...
The commercial aimed at making coke a generic name for 'Thanda.' Of the reason

for picking up the word 'Thanda', Prasoon Joshi, national creative director – McCann

Erickson, the creator of the commercial, said, "Thanda is a very North India-centric

phenomenon. Go to any restaurant in the north, and attendants would promptly

ask, 'thanda ya garam?' 'Thanda' usually means lassi or nimbu pani, 'garam' is essentially

tea. Because the character, in itself, represented a culture, we wanted to equate

Coke with 'Thanda', since 'Thanda' too is part of the popular dialect of the north.

Thus making 'Thanda' generic for Coca-Cola. With the long-playing possibilities of

the 'Thanda' idea becoming evident, 'Thanda' became the central idea. Once we decided

to work on that idea, the creative mind just opened up."13

Between March and September 2003, CCI launched three

commercials with the 'Thanda Matlab Coca-Cola' tag line.

All the three commercials aimed to make rural and semi-urban

consumers connect with Coca-cola.

The first ad featured Aamir Khan as a 'tapori' (street smart);

in the ad he makes the association between Coca-Cola and the

word 'Thanda.'

The second commercial in the series featured Aamir Khan as

a 'Hyderabadi shop-keeper'; here again he equates the word

'Thanda' with Coca-Cola. The third commercial featured

Aamir Khan as a 'Punjabi farmer' who offers Coca Cola to

ladies asking for Thanda.

The three commercials showed progression in associating 'Coke' with 'Thanda' in a

rural/semi-urban context. In the first commercial the connection of Coke with Thanda

was made, in the second one there was a subtle difference, with the shopkeeper asking

customers to ask for Thanda instead of Coke, and the third commercial showed that when

one asked for Thanda, one would get Coke. Analysts said that all the three commercials

succeeded in make rural consumers connect to Coke and increased awareness of the

brand among them. Along with TVCs, CCI also launched print advertisements in several

regional newspapers.

Future Prospects

CCI claimed all its marketing initiatives were very successful, and as a result, its rural

penetration increased from 9% in 2001 to 25% in 2003. CCI also said that volumes from

rural markets had increased to 35% in 2003. The company said that it would focus on

adding more villages to its distribution network.

Coca Cola India's Thirst for the Rural Market - Next Page >>>

13] Shartrujeet .N, Vaid Dixit, Sumita, 'Thanda III' – Coke Scores on Naturalness,

www.agency

Future Prospects Contd...

For the year 2003, CCI had a target of reaching 0.1 million more villages. Analysts

pointed out that stiff competition from archrival PepsiCo would make it increasingly

difficult for CCI to garner more market share. PepsiCo too had started focusing on the

rural market, due to the flat volumes in urban areas. Like CCI, PepsiCo too launched 200

ml bottles priced at Rs. 5. Going one step ahead, PepsiCo slashed the price of its 300 ml

bottles to Rs 6/- to boost volumes in urban areas. (Refer Exhibit III for Pepsi Co's rural

marketing initiatives.)

In early 2003, CCI announced that it was dropping plans to

venture into other beverage businesses. Company sources said

that increasing volumes of cola drinks had made the company

rethink its plans of launching juice and milk-based beverages.

In 2002, CCI had announced plans to launch beverages such as

nimbu paani (lemon juice), fruit juice, cold coffee, and iced tea

in collaboration with Nestle India.14

Though CCI was upbeat on account of its early success in its

drive to capture the rural market, the question was whether the

company would be able to take this success further.

A major media setback occurred in August 2003, when the Delhi-based Center for

Science and Environment announced that it had found high pesticide content in soft

drinks manufactured and sold by both cola majors15. Around same time BBC Radio in
its program – 'Face the Facts' alleged that Coke's plant in Kerala was making excessive

use of groundwater resources in the region and was also contaminating the groundwater

through discharge of toxic elements, thereby harming the land, water resources and also

the food chain in the region.

Though CCI refuted these allegations, the company reportedly experienced a

considerable decline in sales after August 2003. With many social and political groups

becoming active against the cola companies in rural areas, it remains to be seen whether

CCI will be able to quench its thirst for the rural market.

Exhibits

Exhibit I: CCI

Exhibit II: The Rural Market in India

Exhibit III: Pepsico's Rural Marketing Initiatives

14] Wholly owned Indian subsidiary of Swiss FMCG major Nestle.

15] In the light of the allegations, Government of India constituted a Joint Parliamentary

Committee headed by Sharad

Pawar to investigate the issue.