Rural Distribution Exercise: new market and new channel to sale FMCG product

Gone are the days when companies were focusing completely crowded area to sell their product. Initially all FMCG companies started selling their product in area of POP group >10k. Then companies like ITC and HUL who through various innovations started tapping lower population group. Due to increased competition, initially tapped markets has been saturated somehow. Now marketers are looking for new market where they can sell their products and increase the market share. And in the search of new customer where product can reach, marketer came to "Rural market" having population group even less than 5k and thinking of serving these markets directly. Now companies are hiring field staff in the area like Kalpa in Himanchal Pradesh, Mangaliya in Madhya Pradesh to sell products as diverse as shampoo, edible oil and even pizza.

I think, the moove has been triggered because of the combination of good mansoon this year,farm loan waiver, national rural employment guarantee act which all together lead to higher disposable income in rural market. Few more factor like low priced unit of Rs 1, or 2 or 5 and media penetration lead these companies to go so far to small villages. Now let's see how different biggies are approaching to this untapped vergin:

AMUL:

AMUL, the largest dairy brand,has kicked off it's largest distribution expansion excercise to take it's chiiled product like butter, paneer, ice cream and cheese to small towns and districts with population upto 5k. AMUL is expecting a minimum of 20-30%volume growth from these new markets and hence "Gujraat Cooperative milk marketing Federation", the owner of AMUL brand has decided to appoint business partners or super distributors to service these district on hub and spokes model. The cooperative will appoint 200 such super distributors who in turns will serve 3000 new towns and semi urban cities.

Unlike conventional FMCG product like soap or biscuits, distribution of such dairy product is more difficult because it follows 4 different distribution highway:

1- ambient product like milk powder and ghee

2- chilled product like butter, cheese and srikhand

3- frozen product like ice cream and paneer

4- fresh item like fresh milk and curd etc

and each highway requires specific storage, transportation and replenishment frequency.

For this purpose company is also creating a cold chain to transport and store product in closest to the market with require cooling infrastructure.

HUL:

In 2000, HUL collaboratedwith self help group to expand it''s rural reach under project "SHAKTI". It partnered women entrepreneurs called shakti ammas from rural areas of Andhra Pradesh and 14 other states by offering them opportunity for business. The objective was not to reach only but connect to local influencer.Today, there are 45,000 shakti ammas are on the board and taking product to across 1 lakh villages and over 30 lakh households every month. HUL soon figure out that shakti household who are now familiar with companies product range and operation can be used to reach villages less than 2000 Population group. Roughly one in two shakti household would provide a shaktimaan.

around 45% of HUL's turnover of Rs 17,524 crore comes from rural market,valued at around Rs 8,000 crore. Mainly products in the bottom line of pyramid finds takers in these areas. For cattering such opportunity HUL is about to hire 25,000 shaktimaan to sell it's product nearly in 1.5 lakh villages of population less than 2000. HUL has very clear game plan about its distribution model:

  HUL will keep on servicing all areas with population more than 2000 directly through van operation or RS(redistribution stocckiest) while they will use some unconventional way like shaktimaan to reach population strata below 2000.

MARICO:

distribution is the key element of the strategy and that is why Marico is following two pronged approach to increase the availability and reach of its brand. Marico will continue to cover all market directly via  hub and spokes model which falls under 5000 population strata and and have increased manning at the ground. for this purpose Marico has hired support staff of 220 in villages like kalod and rangwasa in madhya pradesh.

DABUR: "feet on street"

Dabur also looking forward for strenthening its rural distribution and for that they have already appointed 150-180 foot soldiers or feet on the streets and increased their stockist by 12% in rural and semi urban areas.these stockist will be served by superstockist and in this way dabur has sharpen its focus on rural areas. Dabur is targetting population group of atleast 3000 and will hire more foot soldiers if results will be enthusiastic.

Apar from soap, shampoo, toothpaste, butter etc there are some other players also who are trying to revolutionize the India rural and semi urban market.Domino's Pizza is one of them who is about to hire 2000 people over next one year and they will come from tier 2 and tier 3 citiesITC, NASTLE, GSK are other few player who are targetiing small villages to strengthen its rural reach.

Over the past few years, new growth for consumer goods companies in most categories has been fuelled by rural market. The pick up in mansoon this year has made up for the fall in demand due to last year's draught.