MUMBAI: Confectionery brands are taking advantage of the increasing wealth of rural India to expand distribution into new areas while at the same time tackling the problem of counterfeit goods.
Brand owners have noted how confectionery products are already trickling down to rural markets via the wholesale route – Cadbury's chocolate and Ferrero India's Kinder Joy and Tic Tac are examples – which is a clear indication of demand. The rise of counterfeiting is another.
The Times of India also observed that there was only a 10-15% gap between rural and urban consumers with regard to awareness about such products.
Consequently, brands are seeking to exploit this unmet demand and the increasing propensity of rural consumers to make impulse purchases as they evolve from what market researchers term "deprivers" into "aspirers".
Cadbury India, for example, is expanding into villages with populations of between 5,000 and 10,000 in nine states. It is aiming to establish a scalable and sustainable route to this market by 2015 and to cover more than 75% of the rural potential in the next two-three years.
"There are certain rural markets we have gone to where there is a demand for Cadbury Fruit-n-Nut chocolate (priced at Rs 35 for 42 grams) and other large bars as well," said Sunil Taldar, director, sales & international business, Cadbury India.
"There is an availability of disposable income and, therefore, there is a need for us to develop point-of-buying solutions," he added.
Currently rural India accounts for around 16% of the total market, while villages of the size Cadbury is targeting contribute about 5%. This equates to a market value of some Rs 300 crore, said to be growing at 19% CAGR.
In addition, the average price point for such sales is rising. Far from buying small packs priced at Rs 2, maximum sales are taking place at the Rs 5 price point Rs 10 is the fastest growing.
"The last mile is getting crossed," said Vijay Udasi, executive director, Nielsen India. "Increasingly, companies are using a multi-pronged approach to serve the rural consumers even in the vast hinterlands."
In the past, Cadbury has successfully expanded eating occasions by building on the Indian tradition of starting something new by having something sweet. The "shubh aarambh" campaign resulted in a 33% increase in volume sales of Cadbury Dairy Milk over a 12 month period.
Data sourced from Times of India; additional content by Warc staff