Rural India offers growth

26 November 2010

NEW DELHI: Spending on fast moving consumer goods is set to increase more than tenfold among shoppers in rural India over the next 15 years, The Nielsen Company has predicted.

The research firm reported that annual FMCG sales in the Indian countryside could reach $100bn (€75.1bn; £63.5bn) by 2025, measured against $9bn today.

Indeed, customers from these areas are expected to post a larger uptick in their outlay than people living in cities.

Food was pegged to lead this process, with the introduction of smaller pack sizes currently proving especially successful.

"While the ability of lower priced packs to improve accessibility is known, their pace and presence has been unrelenting," said Prashant Singh, vp, The Nielsen Company, India.

"The good news is that the opportunity needn't overwhelm smart marketers. For instance, even a mere 2.5% of villages, if selected correctly, can generate a 20% jump in sales growth."

However, growth is not limited to low-cost offerings, as sectors previously concentrated in big cities, like premium skin care, are witnessing a surge in interest.

One example of evolving habits is that many women are diversifying choices of hair dye away from black, to "indulge in the trend of externalized beauty that is picking up fast in rural areas."

"The rural consumer is no longer merely experimenting with urban products because of a phase of prosperity," said Prasun Basu, executive director and vice president, The Nielsen Company.

Other emerging characteristics include a desire to blend traditional Indian hallmarks with modern traits, alongside a heightened focus on individualism and convenience.

"She is revelling in it and indulging unabashedly, providing gratification to her senses and her self-esteem," said Basu.

Governmental investment in the countryside has also tripled during the last four years, with positive knock-on benefits regarding popular expenditure levels.

Significant progress concerning literacy has equally left a mark, as 99% of villages now have a primary school within at least a 1km radius.

Elsewhere, the number of direct-to-home TV connections in rural areas is more than double that of metropolitan centres, while 40% of new mobile phone subscribers are being drawn from less developed markets at present.

In combination, these shifts could yield an "unprecedented pull of consumer demand fuelled by an overdrive of awareness and acceptability," according to Basu.

Gartner has also predicted that rising wealth in rural regions should push up Indian IT hardware and software revenues, helping category sales hit $65.2bn in 2010 and $71.9bn in 2011.

"India continues to be a vastly underpenetrated IT market relative to its potential," said Peter Sondergaard, Gartner's svp, global head of research.

"Infrastructure projects undertaken by India's government will strongly drive IT."

Data sourced from The Nielsen Company/Gartner; additional content by Warc staff