As news of global economic recovery abound, many multinational companies plan to expand into new untapped markets. Consumer goods companies are now more than ever attracted to rural markets in the developing world. Rural markets make up roughly just short of 50% of the world's population and are becoming the hub of the consumer goods markets.
Developing countries like India and China offer large consumer markets, naturally attracting multinational companies. Many have successfully entered the urban markets, but a majority – nearly 40% - of the population of India resides in the rural markets. This offers tremendous opportunities for consumer goods companies.
Many Indian fast-moving consumer goods (FMCG) companies have realized the potential of rural markets. As infrastructure, literacy rates and the purchasing power of rural India increases, FMCG Indian rural market is projected to hit $100 billion by 2025. Hindustan Unilever (HUL), a subsidiary of parent company, Unilever, receives 20% of its revenue from the rural markets. Many multinational companies, including Marico, ITC, and Nestle, P&G, are already tapping into the goldmine and betting large on rural India.
HUL and other FMCG companies have planned strong long term strategies like providing employment to the rural population. By increasing the purchasing power of rurals and creating wealth in that region, companies are able to build brand loyalty and sustain long term growth.
The Indian rural market, when compared to the Indian urban market, is significantly different and possesses many unique characteristics. Firstly, rural markets have lower consumption frequency. Where an urban consumer might but a good every 12 times a year, a rural consumer might purchase the same good 4 times a year. This calls for different packaging and smaller sized products. With a fragile rural environment, companies should keep in mind eco-friendly packaging.
Another unique characteristic is that rural markets are more scattered than urban markets. Furthermore, whereas urban areas and big cities closely resemble each other, each rural area is vastly different from another, in consumer needs, demographics, and buying behavior. Urban areas tend to contain mostly the middle class, but the rural market can hold both upper class and lower class individuals.
This distinction from urban Indian markets leads to different marketing strategies and marketing channels used to reach rural Indian markets. Marketers shy away from mass marketing due to the scattered nature of rural markets. While radio and television advertisements are growing in India, the primary marketing channel is transit, publicity vans, billboards, and advertising on walls and compounds.
Rural markets tend to offer fewer choices. Shops carry fewer varieties of goods, usually only the best-selling products in a line. Brands are constantly competing for shelf space in rural markets, and typically the brand with the largest market share receives almost all of the shelf space.(c) 2012 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.