Rural Marketing in Pakistan

i a m

Why

Rural

Pakistan

Is

Important

???

68% Population 32% Population

Thanks to TV

Awareness in Rural

Has

Increased

Exponential Growth

30% plus Organic Growth (2o10)

S …of major companies

comes from Rural Pakistan

Around

35%

Wholesale

Retail

Modern Trade

Wholesale

Family Grocers

Pharmacy/Mass Retail

Rural

Changing Market Place

In the world

2.5 Billion people earn 1500$ plus per year

…and remaining

4 Billion people Earn less than 1500$

Majority of these

4 Billion people Lives in Rural

Key Factors

In

Rural Marketing

1. Awareness

2. Availability

Trade Off Between

Distribution Cost

&

Incremental Penetration

Vast Geographical Spread

3. Affordability

Low Disposable Income

Avg. Monthly

Consumption Rs.8945/-

Vs.

Income Rs.10,929/-

Dependent Upon

Vagaries Of Monsoon

4. Acceptability

Low Price

&

Low Margins

Customization

Vs.

Standardization

Shopkeepers At Rural

Divided into

Wholesalers

&

Retailer

Assortments Carried

Smaller SKU’s of

Branded Items

Karyana Items

Unrelated Items

Vegetables, Ice etc

Ideas For Effective

Rural Marketing

1. Product Offering

Smaller SKUs

Single Serving (per capita or per time period)

Mainly due to illiteracy

Distinctive

Packaging

Brands are

identified &

differentiated

on basis of

color

2. Price

Attractive Price Points

Rs.10 sachet contributes

around 50% in surf sales

Rs.10 sachet major

growth driver for

powder creamer

Rs.10 sachet rapidly

growing despite challenges

from smuggled tea

Per Gram Costing

Brand Large SKU Sachet

Surf Excel 0.20 0.17

Everyday Tea Whitener 0.43 0.40

Sunsilk Shampoo 0.78 0.60

Cheaper Small SKUs

enhances consumer

acceptance

Attractive Retail Margins

For Retail Penetration

&

Advocacy

Brand Large SKU Sachet

Surf Excel 4.7% 5.5%

Supreme Tea 5.1% 11.1%

Everyday Tea Whitener 8% 8%

Sunsilk Shampoo 9.7% 9.7%

Better Retail Margins on

Small SKUs improves retail

penetration

Retail Margins

Credit to Retailers improves

Trade Relationship

&

Product Penetration

3. Promotion

Connect in More Understandable Way

Use local dialects to engage

consumers

Use Customized

Media

Trade Engagement Activities

Sachet Display Drives

P&G Golden Stores

2% for Displays

Unilever Project

Interface paying 6-7%

& Perfect Shops for

small stores

Contribute Towards the Society

CSR Activities creates a

positive brand/company image

4. Distribution

These wholesalers supplies product to rural

retailers. Products supplied included branded &

loose (unbranded items)

Traditional Rural Distribution System

Distributor

Retailers

Wholesellers

Wholesale Channel

Playing Dominant Role

Product directly distributed to rural retailers

ensuing product availability & minimizing the

influence of wholesale

Direct Rural Distribution System

Distributor

Retailers

Wholesellers

Direct Distribution to

Rural Retailers

Major Hurdle in

Direct Distribution

Cost of Distribution

…which is overcome by

subsidizing rural distributions

Subsidy varies from 50% t0 100%

of expenses

Heads Unilever (50% sharing)

Unilever (Retail Extension program 100% sharing)

Rentals (Rs. 700/day @ 25 days)

17,500 17,500

Fuel (Rs. 5/km cost & avg. 50 km/day)

6,250 6,250

Salesman Salary 7,500 7,500

Loader Salary 4,500 4,500

Total Cost 35,750 35,750

Breakeven Sales (assuming 3.5% avg. dist. margin)

1,021,428 1,021,428

Estimated sub-dist margin ( at 3.5% net margin )

35,000 (assuming Rs.40,000

sales/day)

35,000 (assuming Rs.45,000 sales/day)

Company Sharing 17,875 (50% cost sharing)

35,750 (100% cost sharing)

Net Dist Margin 17,125 (1.7%) 35,000 (3.4%)

Rural Sales Van Costing

Unilever Subsidizing its

rural distributors

This subsidy varies from

50% to 100% in

(Retail Extension Program)

This subsidy helps in

improving distributors ROI

& numeric expansion

resulting in overall rural

stronghold

An Example Of How Subsidy Helps

…make distribution infrastructure

Self Sustaining

Through Subsidy…

But…

Major Challenge

Consumer Price Index

Shrinking consumer disposable

income

8%

24%

Inflation

2008

2009

21%

2010

Maintaing price points becoming

difficult for companies

Increasing Distribution cost &

struggling ROIs of distributors

Attractive Price Points

Rs.10 sachet contributes

50% plus in surf sales

Rs.10 sachet major

growth driver for

powder creamer

Rs.10 sachet rapidly

growing despite challenges

from smuggled tea

Surf Excel promoting Rs. 15 SKU

Decreasing weight

Decreasing weight

Pressure on Purchasing

Power

So Companies Need to be

very ….

In Short…

Right Price Points

Smaller Affordable SKUs

Customized Media

Collaborative Distribution

Better Retail

Margins

Rural Marketing

…

Inflationary

pressures

So

Rural Marketing

Is…

Provided

You Move

With

Sources www.statpak.gov.pk

www.flickr.com

www.google.com

www.research.nestle.com

HUL CDM Sanjiv Kakkar