The rural market's hotter than brands

think
Dec-2009

BANGALORE:

Rural may be hot with politicians today, but not so yet with brands. A Lifebuoy soap or a Britannia
Tiger biscuit is more an exception than the rule. Against an average of 9 biscuit brands per dealer
in urban India, the average number of biscuit brands per dealer in rural India is a mere 3. And you
would find similar differences in every product category.

But there are reasons why businesses should perhaps think differently.

Consider these statistics: The number of middle class households, with an annual income
between Rs 45,000 and Rs 2.15 lakh, is almost as many in rural India, at 15.6 million, as in urban
India, at 16.4 million, according to NCAER estimates.

The per capita annual income in rural India is Rs 9,481, against urban India's Rs 19,407. But as
Pradeep Kashyap, managing director of MART (Marketing & Research Team), noted at a
seminar here on rural marketing challenges, nobody in rural India pays the kind of rents or
education costs that urban Indians do, making rural disposable incomes almost as high as urban
ones.

There is also the phenomenon of rural youth increasingly bringing brand knowledge to rural
households. "They go for higher education to nearby towns, where they experience brands, and
then become very strong influencers back home," says Kashyap.

All this explains why even expensive brands like Close Up, Marie biscuits, Horlicks and Clinic
shampoo do well in rural markets. But an essential element is ensuring wide distribution. In fact,
the successes of Chik shampoo, the second largest shampoo brand, and Ghadi detergent, the
third largest detergent brand, show that distribution, more than advertising, is the key to building
sales.

And if rural markets are seen to be too dispersed, N.D. Badrinath, vice president of TNS India,
suggests the use of socio-cultural regions as a tool for micro-planning. He notes that several
marketing related factors identify socio-cultural regions, including shared seasonality of income
flow, common cuisine, clothes, house construction styles. Such categorisation is expected to help
target rural markets better.
Think Small, Gain Big
14 December 2009, 12:00am IST
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The bottom of the pyramid in India is where the next big growth story lies. And Indian companies
are waking up to this fact. The latest low-cost offering of high-end durables targeted at
households in small-town and rural India is a water purifier from the house of Tatas, which
revolutionised the domestic automobile market by rolling out the Nano. The new water purifier
blends indigenous and advanced technologies and is priced at below a thousand rupees. Other
players in the water purifier business like Eureka Forbes and Unilever have also come up with
low-cost, non-electrical versions priced below a couple of thousand rupees. It makes good
business sense: while the water purifier market is growing at 17 per cent per annum country-
wide, it is growing at a whopping 60 per cent in rural India. And this high consumption pattern in
rural India is not limited to water purifiers alone.

Contrary to popular perception, it is not just SEC A or B (jargon used by marketing professionals
to mean the elite and more affluent sections of our society) but also the semi-urban and rural
markets that are fuelling demand in India. Rural India accounts for almost two-thirds of India's
domestic market and about 60 per cent of its income, according to the Rural Marketing
Association of India. Which is why companies are tailoring their products to fit non-urban
specifications. Innovation is the key to success as the products and services must take into
account the differentiated needs and conditions of rural and semi-urban consumers, who are both
brand and price-conscious.

There are examples of such enterprise already. The sachet concept for shampoos, detergents
and tea opened up a whole new market for FMCG companies. Attractive pre-paid mobile
schemes have added millions of subscribers to the cellular community. Smokeless chulhas,
washing machines without driers, customisable TVs have boosted the bottom lines of consumer
durable giants. Even in the retail segment, be it food or clothing, companies have gained by
altering their non-urban offerings.

But these initiatives are few and far between. Indian companies need to speedily ramp up
production capacities, and come up with fresh ideas across various categories of products and
services to profitably unleash the potential of the rural and semi-urban segments of our economy.
This would, in turn, buoy India's overall economy and have positive implications for our
employment and poverty-reduction goals. The god of small things promises big gains.
LEADER ARTICLE: Farming For Energy
ANIL K RAJVANSHI6 June 2007, 12:37am IST

A farmer is a multi-purpose entrepreneur. His farm produces multiple crops which he sells in the
market. Yet only 25-40 per cent of his crop fetches him money, whereas the rest of his produce
(agricultural residues), which cons-titutes 60-75 per cent of the product, is totally wasted. Often,
he has to burn it in the fields.

There is perhaps no other economic activity where 60-75 per cent of the product is simply junked.
No industry can survive on such low productivity. But for agriculture this wastage is taken for
granted. Apart from the government's low support prices, it is wastage that has made farming
non-remunerative.

In this situation, no amount of subsidies or government support prices can help farmers. Farmers
will really benefit when they get money for agriculture residues. This can only happen when these
residues can be used to produce energy
for powering India. Any marginal farm can produce agricultural residues even if the main food
crop fails. On an average a farmer can get an extra income of Rs 2,000-4,000 per acre from
residues alone if the waste is used to produce energy.

This income can give him benefits even in the case of a distress sale of his crop.

India generates 600 million tonnes of agriculture residues every year. Most of this is burnt by way
of waste disposal, as the farmer wants his fields ready for next crop. A small part of the residues
may be used for mulching, for fuel (for cooking) or as fodder.

Three types of energy can be produced from these residues. Liquid fuels such as ethanol or
pyrolysis oil; gaseous fuels like biogas (methane) and electricity.

Ethanol, which can be used as transport, fuel can be produced by lignocellulosic conversion of
residues. Extensive R&D is being done the world over to optimise this technology. A few large
plants in Canada, Japan and US have already been set up with this technology. Nevertheless, a
lot of research needs to be done to make ethanol production from residues economically viable
and environmentally sound. Theoretically, residues in India can produce 156 billion litres of
ethanol, which can take care of 42 per cent of India's oil demand for the year 2012.

Pyrolysis oil is produced by rapid combustion of biomass, which is rapidly condensed so that the
ensuing vapours or smoke yield oil that is nearly equivalent to diesel. Around 20 per cent of
charcoal is also produced as a by-product in the process. The charcoal can be used as cooking
fuel for rural households. Pyrolysis oil technology was developed in early 1990s in Europe and
North America and is now maturing. A few plants have been set up in Canada, US and China.
Nevertheless, R&D is still needed to make it suitable for use in existing internal combustion
engines. Recent experiments in Sweden on running a 5 MW diesel power plant on pyrolysis oil
have been successful.

India can produce about 400 billion kg of pyrolysis oil from its agricultural residues, which is
equivalent to 80 per cent of India's total oil demand for 2012.

Similarly, these residues can theoretically produce 80,000 MW of electric power all the year round
through biomass-based power plants. This power is about 60 per cent of the present installed
capacity of India. The power plants could either be small scale (500 kW), running on producer
gas from agricultural residues, or medium scale (10-20 MW) running on direct combustion of
these residues.

The technology for this is very mature and there are thousands of such plants running all over the
world. A part of these agricultural residues can also be used via the bio-digester route to produce
fertiliser for crops and methane gas to either run rural transport, irrigation pump sets or kitchens.
Another stream can also be used to produce fodder for animals. Hence, the residues, if properly
utilised, can produce fuel, fodder and fertiliser besides taking care of a huge chunk of India's
energy needs. Which stream of residue conver-sion technology is eventually followed will depend
upon existing market forces. Energy from agricultural residues in India can generate 30 million
jobs in rural areas.

As the demand for energy increases we may see huge tracts of land coming under energy crops
like sugarcane for ethanol production or jatropha for producing biodiesel. This can adversely
affect food production. These effects are being felt in US where huge acreage under corn has
been diverted for ethanol production. Similarly, large tracts of land in Brazil are being directed
from food production to growing sugarcane for ethanol production. The use of agricultural
residues for energy production is, therefore, the best way to settle the food vs fuel debate.

When farmers are forgotten, long-term sustainability of the country is threatened. When farms
produce both food and fuel, their utility becomes manifold. Sixty-five per cent of India's population
depends on farming for its livelihood. If energy from agriculture emerges as an area of interest,
India can emerge as a high-tech farming community. Agriculture is trapped in a low growth rate of
2-3 per cent per annum because it is non-remunerative. If food and energy are produced from the
same piece of land, agriculture growth will be rapid. The writer is director, Nimbkar Agricultural
Research Institute, Phaltan, Maharashtra.
Student entrepreneur bags Cherie Blair
fellowship
14 December 2009, 03:45am

BANGALORE:

When this 20-year-old girl took over her campus chalk company called Scribble, no one envied
her. For, the company's production was never up to mark, customers were unhappy, and profit
was a distant dream.

However, in the next quarter after she became managing director, the production shot up 200%
and the company earned a profit of 37%. And this young entrepreneur from Bangalore was
among the ten who received the Cherie Blair Foundation National Entrepreneurship Network
Fellowship last week.

Sonali Gaddam is a second-year BCom student in Mount Carmel College. She joined the chalk
company run by college students as she was interested in doing business. But she was unhappy
at the working of the company and saw areas for improvement. And in the next elections when
she became the MD, she knew what was to be done.

She moved away from the raw products manufactured earlier to create better-quality chalks. A
well-structured team consisting of four departments were created. They aimed at mass
production. She interviewed her customers, responded to poor feedback and invested in training
her team. And she did all this while manufacturing chalks herself.

And her plans for the future do not end there. She is thinking of fresh recruitments in January,
and is getting trained in the production of dustless chalks. She has stopped production till better-
quality products can be made.

The company now consists of 18 students who work from 3 pm to 6 pm, after college hours. They
earn credits required for the degree in return. The college management initially invested in the
company, while the students, who are shareholders in the company, did the rest.

It was her entrepreneurial spirit that made the Cherie Blair Foundation -- which supports women
entrepreneurs -- take notice of her. She was honoured by a team consisting of Cherie Blair, Kiran
Bedi, Barkha Dutt, Kiran Mazumdar Shaw and many other eminent women leaders in Mumbai.

Sonali plans to start a company of her own aiming at the rural market by the end of next year.
"Entrepreneurship is there in my blood. I do not like the concept of working under anyone and
earning a salary at the end of the month. I want to be my own boss," said Sonali, daughter of a
businessman in R T Nagar.
Philips goes rural with lanterns, cooking
stoves
Wednesday, March 25, 2009 2:39
Mumbai:
Electronics giant Philips is all set to change its image of being a high-end
electronics player. In August-September, Philips Electronics India Ltd will
launch a range of products for the rural and semi-rural markets in India.

Rakesh Sharma, senior director (strategy and business development) at

Philips Consumer Lifestyle, said about two-thirds of Indian homes are
affected by unreliable power supply. "People don't have light because they
are either living in a place where the grid is unreliable and erratic or in off-
grid locations. We have developed 2-3 different types of lanterns including a
torch that will cater to this market," said Sharma.

These lights will minimise health problems for the rural and semi-rural
populace, too. Usually, people there use kerosene or oil lanterns that emit
fumes and have an unpleasant odour. "Our products will offer clean energy
solutions and solve health-related problems by eliminating smoke. They can
replace the traditional lanterns effectively," he said.

Philips has planned three kinds of lanterns. The first, which is based on a
battery charger, is targeted at locations with partial grid situation. The
second uses solar energy to charge and can be used at places with no grid at
all. The third is the general purpose cranking torch that uses LED bulbs for
light. The products are expected to be priced between Rs 500 and Rs 2,000.

Philips is also planning cooking stoves that would deal with indoor pollution, a
menace that rural India has to put up with due to use of extensive wood for
cooking. A study by the National Council for
Applied Economic Research (NCAER) said that about 4 lakh people die every
year due to indoor pollution in rural India. The deaths are caused by
respiratory problems such as bronchitis, tuberculosis, etc. Smoke can also
cause eye ailments such as cataract.
The NCAER study added that about 58% of all Indian homes use wood to
cook, completely or partially. In villages, as many as 90% homes cook using
only wood, with the rest using either wood or kerosene.

"In either case, the smoke emitted severely affects lungs and eyes of the
users. We intend to solve this problem with our range of cooking stoves,
called Woodstove," said Sharma.
Philips has designed two stove models, one of which is ready and one almost
ready. While the first runs on battery and works on the forced-draft concept,
the second operates on natural-draft concept. The forced-draft based cooking
stove has a fan inside to control the flame just like the modern gas-fired
stoves do. This stove reduces smoke by up to 95%, significantly optimises
fuel consumption, can cook two-and-a-half times faster and is portable.
"The forced-draft stove is targeted at households that have some electricity
supply, allowing users to charge it once in a week. The natural-draft will
cater to places with no power supply at all," Sharma said.
Both variants will be launched around August-September. Though the prices
are yet to be fixed, the battery pack version is expected to be available for
Rs 2,500 and the natural-draft stove for under Rs 1,000.

As the company doesn't have distribution network in these areas, it will enter
into partnerships with organisations such MarkFed to market products there.
"MarkFed is a nodal body that represents about 400 agricultural co-operative
societies across the country.
Products targeted at the rural market are normally sold through these co-
operative societies. We have already tied up with MarkFed for the Punjab
region and will extend it to other areas gradually," said Sharma.
Philips also has signed a memorandum of understanding with The Energy and
Resource Institute (TERI) to supply these lanterns as part of the Lighting A
Billion Lives programme.