Branded goods gaining ground in rural India

16 November 2009

KOLKATA: Branded goods are growing in popularity among rural consumers in India, a trend that is set to continue over the next few years as demand levels surge in the fast-growing economy, a report from the Confederation of Indian Industries and Technopak has estimated.

Hindustan Unilever, the local arm of the Anglo-Dutch giant, is one of a number of companies to have stated an intention to heighten its focus on this demographic in the Asian nation.

Procter & Gamble has also announced that it is hoping to add 500 million people to its customer base in the country, with rural shoppers expected to contribute a large percentage of this total.

Spending levels in this portion of the Indian market improved by 25% last year, CII and Technopak found, and will climb to a total of $425 billion (€286bn; £255bn) by 2011, when this cohort will contain between 720 million and 790 million members.
The two organisations further estimate that, at present, members of such communities spend around 35% of their income on food, and 13% on fast-moving consumer goods.

Over the course of 2009, FMCG sales among this audience are also set to grow by 23%, with durables up by 15%, and telecoms by 13%, their white paper added.

More specifically, manufacturers in the fast-moving consumer goods sector were argued to be among the main beneficiaries of a long-term shift at work in the rapidly-developing economy.

"The knowledge that branded goods offer better quality is visible. Established 'upmarket' products of brands like P&G, HUL, Nirma, ITC have found a loyal customer base as opposed to the situation about 20 years back, when they were highly sensitive to price and perceived value," CII and Technopak said.

Among the main reasons cited for this trend were the increasing number of graduates living in rural areas, and rising media penetration rates, exposing consumers to more advertising and branded goods.

Other companies that have sought to take a nuanced approach in the rural market to date include Philips, which developed a low-cost stove, and LG, which introduced a heavily-discounted television set that was able to pick up low-density signals.

Adidas and Reebok, the sportswear specialists, also both boosted their sales by as much as 50% in this setting as a result of cutting their prices to suit the needs of this sub-set of consumers.

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