The Rural Markets are Integrating and Logically so

The Rural Markets are Integrating and Logically So

                                                                                                                Dinesh K Kapila

The trigger point for this thought was an observation of a colleague that the citizens of a comparatively remote mountainous district should continue to eat or rather accord preference to their traditional foods, snacks and drinks rather than increasingly opt for modern day, packaged, food products. This requires a deeper thought and analysis. Can we state that a certain population should continue to adhere to age old cultural conditions connected with food or even to broaden it, with other consumer products. The adage of old is gold, or keep it within the local economy or modern day consumerism is a negative for rural populations has to be revisited. And immediately. 

I remember years ago visiting a local community, if I remember the Bangana Community, just on the outskirts of the hill town of Solan in Himachal Pradesh. The community made a living by buying the lower degree of packaged products and other produce from shopkeepers and selling them with thin margins at villages. They would trek to the villages and after the sales, trek back in the late evenings. Their way of life had been threatened by the laying of the road networks in the areas serviced by them. Now they had to catch a bus, then after reaching a point where the road ended, then start trekking. The villages coming on the road networks now were also turning entrepreneurial and posing stiff competition. The old days were better was the refrain but the need to adapt was also being recognized.

This is the new reality across India as networks modernise and communication links strengthen. The rural population has access to the Audio Visual networks and this is generating it’s own pressures and demand. Resistance is there, ideologically and culturally but it will wear down in due course and in consonance with how deep the existing cultural mores are in a region. Alongside the debate as stated above will continue. I found an interesting observation by Robert J Gordon in The Rise and Fall of American Growth, “Networking inherently implies equality. Everyone, rich and poor, is plugged into the same electric, water, sewer, gas and telephone network. The poor may only be able hook up years after the rich, but eventually they receive the same access”.   Actually, change does not wait. Across the globe, this is a fact.  In the USA the installation of networks, rail, electricity, water telephones, formalized the economy exponentially between 1840 and 1920. The first FMCG Companies evolved in the USA in the 1880s with the development of refrigerated freight railway wagons and the laying of a vast railway network.  Then started the development of department stores with attractive displays and packing and the rise concurrently in consumption of fruits and vegetables all through the year. Then came mail order catalogues and delivery men for Sears etc along with US Post. I am only drawing obvious parallels in the Indian context and stating the formalization of rural India and it’s markets has just begun on a major scale. .  

The emergence of rural markets in India as a segment of a highly untapped potential emphasizes the need to explore them. Marketers over the past few decades, with varied and innovative approaches, have attempted to understand and tap rural markets. Some of their efforts paid off and many sub markets are still an enigma. Rural marketing is an evolving concept, and as a part of any economy, has untapped potential; marketers have realized the opportunity quite recently as also it’s challenges. I strongly feel that improvement in infrastructure and access, promise a bright future for those intending to go rural. Rural consumers are keen on branded goods nowadays, so the market size for products and services seems to have burgeoned. At the same time, a degree of harmonization will prevail across product categories. Local products would in all probability move to a niche or adapt to packaging and branding requirements, even if not in the literal definition of the terms.

Our rural population, in my perception, is now showing a trend of moving to a state of gradual urbanization in terms of culture, exposure, habits, lifestyles, and lastly, consumption patterns of goods and services. Corporates cannot or maybe should not focus on products designed only for rural markets. They could have a lack of success in designing a product with a focus more on the on the rural customers, an example, reducing the product features in order to lower prices is a strategy or gambit which could actually result in failure. My interaction over the years leads me to state that the rural buyers like to follow consciously the perceived urban pattern of living, of course as per their socio economic status and with local cultural factors accounted for. There is by all degrees of analysis a tremendous potential for consumer durables like two-wheelers, small cars, television sets, refrigerators, air-conditioners and household appliances  in rural India.

    Once I was in the hamlet of Fagu, in HP. While taking a walk, to see the local conditions and economic activities, I chanced upon a trunk manufacturer. I asked him about the business, his response was of a quiet resignation. The market was dwindling as people moved to suitcases, no matter their uneven quality in the small villages and short life spans. My reading is that over the year the quality of suitcases would have improved but that of the steel or metal trunks would have reduced even further. If anybody noticed, this segment just faded away across India actually in a span of five to ten years.  In the Kashmir Valley, I noticed in smaller towns, the same packets of water, chips, biscuits, snacks etc. The brands could be local, catering to local sentiments or pricing power but the effort is to sell what sells in a an urban market or semi urban market. At a major village in the plains, I asked a lady, “ghoonghat” (a sort of veil) and all, as to the benefits of the clean drinking water being provided through a machine at a subsidized price. Her response was the expected one on health etc except when she stated “why cannot I drink the same water which you drink in your city”. Drive through only rural roads of Punjab, at major junctions (two or more roads converging), consumer products are of a vast range but the brands could be different. To be more accurate these brands would also be maybe the same as available in the lower socio economic tiers in cities but the main issue is that the aspirations are driving the demand for such products, the brand, quality and pricing may vary.    

I do have a contrary view even if going on a tangent. The traditional Indian Sweets, what we call “Mithai” is even now not branded but has held it’s own. Against the chocolate and bakery products, with all the brand power and packaging and ambience. These products have no branding except our faith and tastes and yes, maybe the name of establishment is the brand. But the ‘halwai” does do reasonably well in our nation.  And some have transited to the next stage by way of classy establishments, clean toilets (yes, it counts), well preserved products in coolers, proper packaging, introducing bakery products etc. Unique to us, both products, different in origin,  are expanding the markets and our waists.  (Forget the plains, I suggest a trip to Srinagar to see the local bakeries catering to local tastes really flourish).      

If we peruse some data, some estimates suggest that 41 % of the middle class is in rural areas, 58 % of the disposable incomes are in the rural areas.  Some data suggests or indicates 70 % of the toilet soaps and more than 41 % of two wheeler sales are in rural areas. Some opinions would lead us to believe that broadly the FMCG Sector is growing faster in the rural areas now. Companies are experimenting with Reverse Logistics to drive penetration, such as Amul and many at a less successful level. Literacy levels as I see were abysmal, around 22 % in rural areas in 1947, now they are reported to be above 65 %. Lifestyles are changing, as are tastes, economic status and the infrastructure (roads, electricity, communications). As per me this adds up to a high degree aspirations or rather expectations. The nation is really seeking to move out of it’s stagnation and the adjusting to living life as it comes over the years.

Challenges and barriers are many and I would readily acknowledge the same based on visual evidence and access to data. Poverty in some regions and even in the more developed regions in endemic and the predominant employment mode is of daily wagers. This drags down the per capita incomes and concentration of potential markets.  Consumption could be seasonal (in the small town of Nawanshahr in the Doaba Region of Punjab, the December to March is NRI Season and hence high sales season) and  and the impact of climate, such as the monsoon is a reality. The poor maintenance of infrastructure is a reality such as of roads, electricity may be supplied off and on and impact lifestyles and ability to store, water and irrigation supply infrastructure could run down and impact generation of incomes, the inability to influence pricing of the produce and it’s impact on incomes is also a reality.

Companies are attempting the traditional four A’s to drive penetration, Availability, Acceptability, Awareness and Affordability. Models such as ITC’s e-Choupal, it’s Agri Business Venture, and Amul as also HLL’s varied models do work and have demonstrated success after a time lag. The issue is complex as traditional channels do not function and local levels of influence have to be incorporated or dealt with. The major landowner, the local commission agent (arhtiya) and money lender are realities.  However major brands have evolved also. If I remember correctly a major biscuit brand with headquarters in UP (Priyagold or maybe a brand close to this name) evolved  after catering to mainly rural markets. Optimism certainly prevails. I met recently an entrepreneur who is attempting to be the Amazon or Flipkart of rural India for rural inputs and products. His repeated forays into the rural areas have convinced him and his backers that the time for scaling up is now on. He has managed over 75000 to 80000 deliveries already in ten districts in a couple of states while the project is very much in the design and initial execution stage. Of course it cannot be like the urban models, some extension service has to be provided to build credibility and acceptability and a network developed for storage and delivery. This network has to be credible and willing to be an active participant on thin margins. Delivery systems are being tracked and developed by algorithms too. Margins are improving of the main entrepreneur already. The point, markets are evolving fast and consumption patterns.          

A colleague had a rather interesting insight. The internet is driving awareness levels and dresses and styles are sought to be imitated. You can control access to the TV but not to the mobiles. Considerable pockets exist with weak connectivity but the Government’s broadband drive is having multiple spin offs. Beauty Culture courses have a major demand in rural areas and so do food processing and tailoring. It’s an interesting evolution as varying cultures and generations and both genders attempt to handle the varied viewpoints (or even throttle, many are feeling threatened too) and they even clash at times.

That takes us back to the initial point. Can we be nostalgic or rather have opinions and then state that certain populations should adhere to the age old habits as they are healthier or local based. I feel it’s time to move on, specially on consumption and consumer goods. As we evolve and develop, first the newer and recently introduced products will scale up in sales and demand, then will plateau. Alongside, the local products, if implicit demand exists, will also evolve and modernize their products and stage a comeback. I have noticed this in the Ayurvedic and Unani markets by major groups and also in small towns by by standalone establishments. The rebalancing will evolve naturally but maybe not by the same existing players. These are interesting times as the Rural Markets head for a major transformation.

Just one more point. Major corporates have actually shied away from investing in the rural value chains. Perhaps with the introduction of GST and the formalization underway, they would feel encouraged to invest now.   This would impart the impetus so much needed to open up the rural economy.

-----------------------------------------------------------------------------------------------------------------

.