Brand giants aim for rural India

30 August 2011

NEW DELHI: Brand owners including PepsiCo, Canon and Intel are all targeting rural India, where levels of discretionary expenditure are rising rapidly.

PepsiCo, the food and beverage giant, has aimed to serve this audience using lines such as Lehar Iron Chusti, a snack range enriched with iron that costs 4¢, as well as a glucose drink commanding 10¢.

Geetu Verma, Pepsico India's VP, innovation, told CNBC: "We have a pipeline of innovative products to penetrate this consumer segment and deepen the market. And the price points reflect the pockets of the consumer we are targeting."

There are 350m consumers in India earning between $2 and $5 a day according to the National Council of Applied Economic Research, which predicts 500m people will claim between $2 and $12 a day by 2020.

Many of these buyers reside in the estimated 600,000 villages across India, and boast a cumulative outlay of around $50bn at present.

"Considering that 90% of these consumers stay in villages, live in their own homes, grow their staple food and get free water and electricity under rural welfare schemes, they spend almost 100% of their income on discretionary items," Pradeep Kashyap, founder of MART, a specialist consultancy, said.

"This makes them the largest and the fastest-growing market for soaps, toothpastes, colas, cookies, phones, bicycles and more."

Intel, the technology group, has held around 500 events in rural India in the last two years, each of which have attracted up to 1,000 visitors, most typically representing families with teenage children.

"Smartphones have taken the intimidation out of technology," R Sivakumar, Intel's managing director for marketing, South Asia, said. "Surprisingly, it is not the price points that matter to this consumer as much as the potential of the product or computing solution to change his life."

Canon, the electronics group, reported that over 50% of its Indian sales are currently generated outside of major urban centres, and expects the countryside to help drive revenue growth of 30% next year.

Kensaku Konishi, Canon India's CEO, said: "India, along with China, holds out the best prospects for the company. And the rural markets here, noted for their new-found disposable incomes, will play a key role."

LG, the electronics firm, has also seen demand rise by 50% in the same areas in the recent past. "Sales growth for us is still higher in rural and semi-urban areas than metros and large cities," YV Vermasays COO, LG Electronics India, said.

Data sourced from CNBC/Economic Times; additional content by Warc staff