Rural Marketing: The Next Big Revolution

Rural India accounts for around 50 per cent of India’s gross domestic product (GDP) and houses nearly 70 per cent of the country’s population. The market is a unique mix of burgeoning incomes and growing aspirations of around 850 million consumers who inhabit about 650,000 villages in the country. Some of India’s biggest companies generate one-third of their consumers or business from the hinterlands. Hindustan Unilever (HUL) generates about 40 per cent of its total business from these rural markets which also accounts for 30 per cent of Coca-Cola and Maruti’s turnover. Of Airtel’s 8.6 million DTH customers, about a third comes from rural regions in the country.

Consumption habits of people in rural regions are progressively mirroring those in urban areas. Due to this changing trend and the massive market, the hinterlands offer tremendous investment opportunity for private players. Rural India housed 75 per cent of all new factories built in the country in the last decade. Also, factories in these areas account for around 70 per cent of new manufacturing jobs.

Market Size

Rural India is now being seen as a major hub for investment by India Inc. In the period 2009–12, spending in rural India reached US$ 69 billion.

The per capita gross domestic product (GDP) has grown at a compound annual growth rate (CAGR) of 6.2 per cent since 2000, in the country’s rural areas.

Rural consumption per person is said to have risen by 19 per cent yearly in the period 2009–12, which includes some impulse-driven categories.

At the end of 2013, mobile penetration in rural India was 41 per cent, while handset penetration was a little over 30 per cent. According to industry estimates, there are more than 250 million handsets in rural regions of the country, of which nearly 30 million users access the Internet on mobile phones.

Road Ahead

Consumption patterns in rural markets are undergoing a change. Brands are no longer a novelty and premium products are a regular feature. Products which have traditionally been difficult to deliver in these regions are slowly penetrating the market. Amul, for one, has opened parlors in rural areas with their sales believed to be outstripping those from urban areas. There is also big demand for products once viewed as being exclusively urban, such as chocolates, cheese and pizzas.

Nielsen estimates that rural India’s FMCG market will touch US$ 100 billion by 2025. Online portals are expected to play a vital role for companies trying to access these markets. The Internet allows for a cost-effective means to increase a company’s reach by overcoming geographical barriers. Today, with rural India being gradually empowered with computers and smartphones, the Internet will soon gain a foothold.