Nielsen Middle India Report 2011 120602064823 Phpapp02

Managingthe Middle India

Gold RushDecember 2011

2 Copyright © 2011 The Nielsen Company.

Managing the Middle India Gold Rush

The Nielsen Company December 2011 Ranjeet LaunganiExecutive Director, Nielsen

Article at a glance For more than a decade, marketers have focused their energies primarily on the thriving metros and the colossal rural Indian opportunity; but as we weigh the still-to-be-had opportunity with the efficiency of reach over the next 5-10 years, marketers should give Middle India a serious look.

While metros will remain a staple for marketers and increasing a rural footprint will be critical for volumes in the long run, there is a growth opportunity that is vastly under-rated by many marketers today, which could emerge as a key growth engine for the next 10 years. Middle India, a region made up of approximately 400 towns each with a population of 1-10 Lac, are home to 100 million Indians and today constitute up to 20 percent of the country’s FMCG consumption.

Middle India will grow from an FMCG market worth INR 287 Billion (5.74 Billion USD) today to over INR 4 Trillion (80 Billion USD) in value by 2026 and it is about time marketers took notice.

Fast Facts:

•Middle India has outpaced the all-India growth story: Since 2002, the FMCG sector grew 3.5 times in Middle India, compared to 3.2 times in all-India.

•Middle India per capita FMCG consumption stood at over INR 2,800 (56 USD) in 2010 versus the all India number at just under INR 1,200 (24 USD).

•The top 10 FMCG players in Middle India have added INR 35.8 Billion (716 Million USD) from these 400 towns in 2 years alone.

•Forty-nine of 81 FMCG categories tracked by Nielsen in early 2011 saw faster growth rates in Middle India than their all-India rates.

•As of May 2011, FMCG per-dealer offtakes increased to 14+ percent for Middle India – up 2.7 points from 2010 versus an increase of 1.5 points for metros.

•The number of FMCG stores in these 400 towns has seen a rapid increase: more than 250 new stores were added per town in the last three years.

The purchasing power of the contemporary Middle India consumer and the sheer plethora of goods and services available are unprecedented. This market is expected to continue growing at a healthy rate at least for the next decade, which offers most companies ample lead time to strategize on how to tap into this segment.

Marketers who make an aggressive foray into Middle India over the next few years will need to have a good understanding of changing consumer aspirations and be mindful of some of the infrastructural drawbacks if they are to manage this gold rush successfully. By studying the Middle India consumer profile, marketers will be better equipped to cater to this creamy middle layer and define their growth strategies in these smaller towns.

The Middle India demand revolution has begun. The Gold Rush is here.


While marketers remain fixated on opportunities at the bottom-of-the-pyramid and in metro regions, not many are aware that only the metros and Middle India (1-10 Lac population towns) have outpaced the all-India growth story in the last 8 years. Even today, Middle India leads the pack across urban and rural segments for FMCG value growth rates.

Middle India on topWhile 70 percent of the Indian population still resides in rural areas, poor reach and inadequate infrastructure have made it difficult for marketers to fully tap into the potential of these markets quickly. Most FMCG companies have concentrated their energies on the metro and mini-metro regions in the past 10 years. Although some companies have partially penetrated the Middle India market, many tend to overlook smaller towns, ignoring the fact that these markets are perhaps easier to penetrate due to relatively sparse competition. Considering the expected growth of population in this area, rise in incomes and aspirations and the expected influx of people from even smaller towns to Middle India, this market is expected to create huge opportunities for marketers in the coming few years.

Strong Value Growth: recently Middle India is growing at 20% (up 3+ points from 2010)

Value Growth %

MAT May 2010 2011 Delta

All India 18.5 18.8 0.3

Metro 16.4 19.1 2.7

1-10 Lac towns 16.9 20.1 3.2

Rest of Urban 15.6 19.5 3.9

Rural 22.8 17.5 -5.4

Middle India has been outpacing the all-India FMCG story for many years now

FMCG Value Sales (Rupees Billion)

Year2002

Year2010

MultipleIncrease

All India 442 1,425 3.2

Metro 110 412 3.8

Middle India 83 287 3.5

Rest of Urban 98 245 2.5

Rural 151 480 3.2

354towns

68million

42towns

31million

# of towns Population

1-5L 5-10L

Middle India: home to 100 million Indians

“Still-to-be-had” Opportunity + “Medium-term ROI” ScaleUrban: Middle India (1-10 Lac towns)

Growing middle India; approximately 400 towns

Rest of Urban (<1 Lac towns)

Fast growing but very spread out (Approximately 7,500 towns)

Rural India70% of the population but inefficient reach a challenge for marketers

Urban: Mini MetrosSteady growth; in the spotlight for the last 5+ years

Urban: MetrosBread & butter for most marketers for many years now; competitive

The expansion of Middle India shows that the demand revolution is percolating to the next tier of cities. Why do these cities matter? These cities are ready to behave like the metros of tomorrow. Of the total INR 1.4 Trillion (28 Billion USD) in FMCG sales in 2010, goods worth about INR 287 Billion (5.74 Billion USD) were consumed by the Middle India population. This number makes up more than 20 percent of the overall FMCG sales, and 30 percent of the urban FMCG sales. Middle India is also home to 30 percent of all urban stores, comprising over 900,000 Million stores today. In addition to this, the annual per capita FMCG consumption of Middle India towns touched INR 2,800 (56 USD), which exceeded the national average by INR 1,600 (32 USD). This is a significant achievement for these smaller towns, considering the fact that the metros breached the INR 2,800 (56 USD) mark as recently as 2009.

The 100-Million-strong population is only one of the reasons why marketers should take note of Middle India. In addition to the large size of the Middle India population, the increase in household incomes and rise in spending power makes it an attractive market for consumer product companies. Many studies in recent years have focused on the rise of the Indian middle class, pegging this group of strivers—annual household income of at least INR 500,000 (10,000 USD)—and seekers—annual household income of at least INR 200,000 (4,000 USD)—to rise to over 500-Million-strong in 15 years. We believe this rising middle class story will disproportionately advance the expansion of Middle India over the next decade.

Source: Nielsen

Source: Nielsen

Source: Nielsen

Source: Nielsen


In these 1-10 Lac towns, 49 of the 81 categories outgrew the all-India rate in 2011 vs. 2010

1-10 Lac Towns Value

Growth indexed

to All-India (MAT May 2011 over

2010)

Personal Care / OTC

Household Care

Food

1.5X ormore

After shave lotions, Nail

enamel, Coconut

oil, Shaving preparations

Batteries, Scourers,

Glass cleaners, Soap

cakes/ bars

Chayavanprash

1.25X ormore

Antiseptic creams,

Antiseptic liquids, Acne preparations,

Baby oils/ massage

Air fresheners, Utensil cleaners

Cough lozenges, Packaged tea,

Glucose powders

1.15X ormore

Analgesics/ Cold remedies,

Condoms

Liquid toilet soaps, Toilet

soaps

Breakfast cereals, Chewing gum,

Squash cordials & drinks, Biscuits, Milk foods, Baby

foods, Chocolates

The growth figures for different FMCG categories also reveal a strong and vast market potential for Middle India. Out of the total 81 FMCG categories, 49 product categories across personal care, over-the-counter drugs, household care, and food outgrew the all-India rate. Over 30 categories saw growth rates faster than 1.15 times the all-India rate. The top five fastest growing categories like diapers, scourers, liquid toilet soaps, acne preparations and air fresheners, which fared strongly in the past year, performed even better in 2011, indicating continued possibility of robust growth in the near future.

Interestingly, the focus on hygiene, health, personal grooming and convenience seems to be driving the rapid growth in these towns. Middle India is also accepting evolved categories like breakfast cereals, air fresheners, acne preparations, and liquid toilet soaps. The metros took on to many of these categories in a big way just a few years ago and Middle India does not want to be left out.

Why does Middle India matter?

1-10 Lac Towns contributed INR 287 billion in

FMCG sales in 2010

This is 20% + contribution to all

India FMCG and 30% + contribution to all

urban sales

This makes up for 11% of all FMCG

stores in the country & more than 30% of

all Urban stores

Versus a national average of under INR 1200; of note, metros

have only breached INR 2800 in 2009

1-10 Lac Towns are home to

more than 910K FMCG stores

Annual per capita FMCG

consumption over INR 2800

Marketers have been taking notice of Middle India: in the news in recent times

Van Heusen, Louis Philippe eye smaller towns, cities (June 2011)

Quality tea now finding takers in smaller cities (April 2011)

FitnessOne to invest Rs. 30 cr to expand in tier II, III cities (April, 2011)

BPOs offer jobs to school pass outs in smaller cities (April, 2011)

India’s Fortis to open 25 low-cost hospitals over 3 years in smaller towns, especially in tier II and Tier III cities / June 2011

Blue Dart to spread wings to tier 2,3 towns (April, 2011)

Bacardi seeks to spread cheer to smaller cities (July 2011)

Omaxe to focus on small towns (as inventory is pilling up in tier-1 cities) (June, 2011)

Middle India: firing on both cylinders Cash registers in stores all over Middle India seem to be ringing off the hook, thanks to the growing consumer wallets, increased exposure to the ‘metro’ lifestyle, a larger assortment of product supply, and improved access to consumer finance. While the change in consumption patterns in Middle India can be partially attributed to a rapid surge in consumer demand, the increasing ubiquity of consumer products is contributing to this growth as well. It is a story of consumer pull meeting distribution push. Source: Nielsen

Source: News Reports

Source: Nielsen


These developments augur well for FMCG companies, especially in light of the fact that this market is still in a nascent stage, and is expected to grow substantially in the next five years. The rise in demand for consumer products and relatively lower penetration of FMCG companies in these towns means that competition is not as fierce in these towns as would be in larger metros. A few major players with adequate capital and wide distribution networks are already cashing in on the opportunity. The annual turnover of the top ten FMCG players from the Middle India segment rose more than 42 percent by INR 35.8 Billion (716 Million USD) in just two years between 2009 and 2011.

Its not just a story of sheer volumes, Middle India is also capturing marketers’ attention due to a shift in demand, a direct consequence of people’s rising aspirations for a better lifestyle in these regions. Consequently, there is an increase in the Middle India consumers’ willingness to spend more

on a variety of products that enhance their standard of living. They are accepting categories that never were part of their consumption basket. This has opened up a window of opportunity for FMCG companies to introduce products that were initially brought to market primarily for the metros. The size of the opportunity will multiply in the next few years as these new categories will see deeper penetration levels across a larger household base.

The consumer pull storyIncreased exposure to the media and a gradual improvement in infrastructure have played a substantial role in introducing the Middle India population to what was earlier only a ‘metro’ lifestyle, fuelling a desire to improve their standard of living. These factors, combined with an increased spending capacity, are rapidly pushing up the demand for a vast consumer product profile in Middle India.

Per Dealer Offtake Growth %

MAT May 2010 2011 Delta

All India 12.1 13.0 0.9

Metro 14.5 16.0 1.5

1-10 Lac towns 11.7 14.4 2.7

RoU 9.7 12.8 3.1

Rural 15.1 11.4 -3.7

The top 10 FMCG players in these

towns clocked INR 86 Billion in value

sales in 2009

The same players had a turnover of

INR 121 Billion from these towns

in 2011

+42%

Strong Value Growth: Just the top 10 FMCG players have added 35.8 Billion from Middle India in 2 years

Source: Nielsen

Source: Nielsen

MAT May

Source: Nielsen


The distribution push storyIn addition to the surging demand for consumer products in Middle India, marketers are extending their reach in the 1-10 Lac population towns through a constantly expanding distribution network. As a result, new FMCG retail stores have mushroomed in these towns in the past few years.

A strong indicator of this trend is the rise in per dealer offtakes – which represents the average sales per dealer over time. The per dealer offtake in Middle India saw a rise of 2.7 points in 2011, compared to an increase of 1.5 points in metropolitan cities in the same period. This is a growth of more than 14 percent over the previous year (MAT May 2010). For some FMCG categories like cheese, packaged rice, diapers, etc., the increase in per dealer offtake was quite substantial, at more than 30 percent! Per dealer offtakes for almost a dozen and a half categories in Middle India towns grew at over 20 percent in the last one year alone.

The top ten FMCG companies in these Middle India towns saw a spurt in per dealer offtakes, which grew 17% in one year.

The last three years have also seen a rapid increase in the # of FMCG stores

June 2008 May 2011

Overall Numberof Stores

823K 926K Increase of 250+

per town

Number ofChemists

61K 80K Increase of 31%

Number ofModern TradeStores

1094 1501Increase of

37%

Consumption baskets in these towns are evolving –

categories as varied as breakfast cereals, air fresheners, and glass cleaners which earlier saw little acceptance in these towns are

growing much faster in these towns than at the all-India level.

“”

Source: Nielsen

Source: Nielsen


The total number of stores in these towns rose from 823,000 in June 2008 to 926,000 in May 2011, an average addition of over 250 stores per town. The top ten FMCG players in the 1-10 Lac population towns have aggressively expanded in these areas, adding 29,892 stores on average in the last year alone and 55,767 stores on average in the last two years. More number of stores translates into an increased supply infrastructure, which is helping marketers push products to consumers faster. Not surprisingly, the distribution reach of as many as 15 categories in the FMCG sector has grown by over 5 All Commodity Value (ACV) distribution points in the 3-year period from May 2008 to May 2011. Marketers who had recognized the potential and invested in these regions a few years ago are, today, laughing their way to the bank.

When we evaluated some of the top national FMCG players on their Middle India performance, two things were clear:

1. Not all national players were optimally leveraging Middle India for growth2. Smaller national players were giving the heavy weights a fight in these 1-10 lakh towns

A case worth mentioning: it is interesting to note that Cadburys ranks #5 in value sales in 1-10 Lac towns versus a #6 ranking at an all-India level. In the last 3 years, Cadburys has added 30% more stores in these towns (the biggest leap of any top-10 player) and the results are showing! In fact, in the last quarter of 2010, it actually moves to #4 place in 1-10 Lac towns.

Spotlight: The smaller 1-5 Lac population towns

In 1-5 Lac towns, 56 of the 81 categories outgrew the all-India rate in value in 2011 vs. 2010

1-5 Lac Towns Value Growth indexed

to All-India (2011 over 2010)

Personal Care / OTC

Household Care

Food

2X or more

Tooth Powder, After-shave lotions, Lipsticks,

Shaving preprations, Hair Conditioners

Glass cleaners, Utensil cleaners, Toilet cleaners, Other Scourers,

Batteries,

Chayavanprash

1.5X or more

Coconut Oil, Twin Blades, Liquid Toilet

Soap, Acne Preprations, Baby Oil/Massage, Antiseptic Cream

Air Freshners, Shoe Polish

Packaged Rice, Coffee, break Fast Cereals,

Milk Food

1.2X or more

ToothPaste, Toilet Soap, Talcum Powder,

Skin Creams, Shampoo, Sanitary Napkins,

Ruberfacients, Nail Enamel, Hair Oils, Hair Dyes, Glucose Powder, Fragrance, Digestive,

Diaper, Condom, Antiseptic Liquid

Washing Powder, Home Insecticides,

Soap Cakes/Bars Floor Cleaners,

Utensil Cleaners

Packaged Tea, Ketchups/

Sauces, Chocolate,

Beverages, Baby Food

2010 Rank

All-India Value 1-10 Lac Town Value

1 Hindustan Unilever Limited Hindustan Unilever Limited

2 Procter & Gamble Procter & Gamble

3 Nestle India Nestle India

4 Parle Products Britannia Inds

5 Britannia Inds Cadbury India

6 Cadbury India Parle Products

7 ITC ITC

8 Colgate-Palmolive Adani Wilmar

9 Dabur Frito Lay India

10 Godrej Consumer Products Godrej Consumer Products

Demonstrate better All India performance vs Middle IndiaDemonstrate better Middle India performance vs All India

Source: Nielsen

Source: Nielsen

Source: Nielsen


The buoyant Middle India story is not restricted to just the larger Middle India towns. In the 350+ 1-5 Lac population towns, the story is equally compelling. Not only are these towns growing at over 20 percent, but 56 of the 81 categories are also outperforming the all-India growth rates. 15 categories are exploding in these 1-5 Lac population towns with over 40 percent value growth in 2011 over 2010. Products as varied as skin creams, coffee, baby oils, fragrances, and chocolates are outpacing the all-India growth story. Even these 1-5 Lac population towns do not want to be left behind.

Nielsen also evaluated the consumer confidence of these smaller towns. Nielsen’s research indicates that while the consumer confidence index in the towns with 1-5 Lac population is lower than that of a benchmark mini-metro town like Pune, many smaller towns are performing much better than several developed and developing markets across the world. Anantapur, for instance, has a consumer confidence index of 114, which is fairly close to Pune’s 127, and scores higher than many other urban areas. Importantly, consumer confidence in Middle India spans a continuum, where towns like Anantapur come surprisingly close to the optimism of the larger mini metros and towns like Bhatinda complete the spectrum at the lower end. These numbers indicate that as marketers decide to be part of the gold rush, they have the liberty of cherry picking towns in the first few years. In addition, a one-size-fits-all approach may not work for all these smaller towns. Factors that influence stronger consumer buoyancy include the level of employment, infrastructure growth (including education infrastructure), and proximity to a metro.

Many FMCG giants have leveraged factors like steady flow of capital, wide distribution networks and better understanding of the local markets to establish themselves in these towns. Nielsen found that some companies, which do not rank at the top in terms of all-India FMCG presence, have expanded

15 categories are growing at over 40%.The Top 8 categories grew in value at an average rate of 70% in 2011 over 2010 and this was 2 times their all-India growth rates.

Food Breakfast Cereals,

Chocolate, Vermicelli & Noodles,

Packaged Rice

Household Air fresheners,

Home Insecticide, pre-post wash, Other Scourers

PersonalLiquid Toilet Soaps, Hair conditioners, Acne Preparations, Diapers Fragrance,

After Shave Lotion , Twin Blades

Middle India97

127Pune

Bhatinda79

Jhansi96

Nanded99

114Anantapur

And consumer confidence is reasonably buoyant…On the Middle India continuum there are several towns like Anantapur that come close to the consumer buoyancy in larger towns

Stories like that of Anantapur are promising when compared to Pune, which has been on the development path for many years now.

Of note, the consumer confidence index for Middle India while lower than Pune is much better compared to many developing and developed markets world wide.

aggressively and gained a stronghold in the towns with 1-5 Lac populations - players like Ruchi Soya and Adani Wilmar are among the top FMCG players in these smaller 1-5 Lac population towns. It is also evident that while certain bigger national players have made these towns their focus, others are still to catch on to the Middle India bandwagon. The high value growth in these 1-5 Lac population towns supports the longer-term Middle India story – it is not only the larger of these towns that will sustain this story in the coming decade. The demand revolution has percolated deep into these towns.

The buoyant Middle India story is not restricted to just the larger Middle India towns.

In the 350+ 1-5 Lac population towns, the story is equally compelling.

“”

Source: Nielsen

Source: Nielsen

(Benchmark)

MAT May


While some FMCG players have been ahead on the Middle India curve, others have opportunity to catch up.

2010 Rank All-India Value 1-5 Lac Town Value

1 Hindustan Unilever Limited Hindustan Unilever Limited

2 Procter & Gamble Nestle India

3 Nestle India Procter & Gamble

4 Parle Products Adani Wilmar

5 Britannia Inds Britannia Inds

6 Cadbury India Parle Products

7 ITC Cadbury India

8 Colgate-Palmolive ITC

9 Dabur Ruchi Soya

10 Godrej ConsumerProducts

Frito Lay India

1. Education on a higher pedestal

Education is paramount in Middle India. The education sector in Middle India has made considerable progress in the last five years, reflecting the population’s belief that higher education is the ticket to a stable career and a better life.

Modern-day parents from smaller towns are more optimistic about their children’s educational opportunities, which was not the case a decade ago. Parents today, aspire to educate their

children in English medium schools, as it opens the doors to a brighter career. Nielsen’s data shows that the Middle India population’s desire to join the best institutions like IIMs and IITs, at 47 percent, is nearly at par with that of an education-centric city like Pune. While post graduation studies in Middle India find favor with only 42 percent of the population—nearly half the figure of Pune—an impressive 50 percent of this stratum aspires to join professional courses like medical and engineering versus 57 percent in Pune. While the numbers are not at par with the urban regions across the board yet, they indicate a growing awareness about the importance of education.

Although the infrastructure in smaller towns may not be comparable with that in other urban areas, Nielsen’s findings indicate that these towns have made significant strides in ramping up basic infrastructure like schools, hospitals and public transport. A steady rise in employment rates, income and spending are expected to have a positive impact on the economy of these towns in the next few years. A stronger infrastructure would aid marketers in pushing their products and help achieve economies of scale. However, bugbears like corruption and weak law and order still persist, and these will need to improve fast, so that the Middle India sheen is maintained.

Decoding the Middle India consumer

What is important to the Middle India consumer?

The consumption patterns in Middle India mirror the change in the consumer profile. The consumer fabric in these towns is evolving. Marketers will be in a position to maximize their rewards in Middle India if their offerings are customized to the changing needs and aspirations of this consumer. Will the middle India consumer display the traits of a metro consumer in certain situations and those of a rural consumer in other scenarios? What do we know about what is sacred to this consumer group? Some key learnings and trends about the Middle India consumer are worth highlighting.

Source: Nielsen

Source: Nielsen

Source: Nielsen

Demonstrate better All India performance vs Middle India

Demonstrate better Middle India performance vs All India


The number of schools, colleges and educational institutions that have sprung up in these small towns has kept pace with the growth in the education sector in India. The rate at which these institutions have proliferated has outshone the rate of growth in other infrastructure facilities like roads, security, water supply, etc. For instance, Nielsen’s figures indicate that Jhansi, a small Mid-India town, has outgrown Pune’s development in the education sector in terms of consumer perception over the last few years. Moreover, education opportunities in these towns are not only compelling people to stay back, but also drawing people from even smaller towns. One area where development is still needed is in the higher education (post-graduate) sector.

2. Health & Wellness

Health consciousness is evident in Middle India households as a large portion of citizens claims to periodically practice some form of exercise, like Yoga, walking, swimming or visiting a health club or a gymnasium. Our study shows about 24 percent people from Middle India practice Yoga, which is much higher compared to the 19 percent who do so in Pune. In line with this awareness, the consumption of health foods like oats, cornflakes and other low cholesterol products in these areas are at par with Pune at 37 percent. In addition to food choices, Middle India consumers are also opting for annual health check-ups and gathering more information on staying fit.

Not surprisingly, many healthy food categories are seeing faster growth in Middle India relative to the all-India rates. Categories like Chyavanprash, milk foods, and breakfast cereals are growing at rates of about 20 percent higher than the all-India numbers. 3. Personal Grooming

Personal grooming has become increasingly important to Middle India – personal care categories dominate the list of Middle India categories outpacing all-India value growth. Affordability, access, and awareness have contributed to the rapid rise of the personal care segment.

Affordability, access, and awareness have contributed to the rapid rise of

the personal care segment.“ ”Source: Nielsen

Source: Nielsen


4. Home Improvement & Hygiene

The consumers in Middle India want their house in order and are beginning to partake in categories that were earlier not a big part of their consumption basket. Household supplies and cleaners are seeing a spurt in growth in Middle India towns relative to all-India levels. The increasing household budgets have allowed for new categories to enter the household. Housewives are open to purchasing specialty cleaning products to help them with household chores. This incremental expenditure on improving the home is an investment many Middle India families are consciously making.

5. Eating out & experimentation in the kitchen

Despite making efforts to lead a healthy lifestyle, the lure of fast foods and eating out seems to be getting the better of consumers in smaller towns. Convenience foods like instant noodles, ready-to-cook foods and readymade spices adorn kitchen shelves in Middle India. Although a very small percentage of the population—24 percent compared to Pune’s 60 percent—prefers to eat out, the numbers are fast rising since the last two years. Nielsen found that families prefer to frequent fast food joints and bakeries, relishing Chinese, South Indian, Punjabi and American cuisine. Moreover, global fast food giants like McDonalds, Pizza Hut, and Dominos are considered an affordable and trendy option for a weekend family dinner outing. Despite a recent squeeze in budgets due to high inflation across the board, 80 percent of Middle India (versus 90 percent of larger cities) is either eating out at similar or higher levels than what they did two years ago.

2010 Rank

CategoriesMiddle India

Value GrowthRate

Growth IndexOver All-India

Rate

1 After Shave Lotions 10% 971%

2 Batteries 5% 291%

3 Other Scourers 71% 194%

4 Cleaners - Glass 22% 188%

5 Chyavanprash 28% 184%

6 Soap Cakes/Bars 9% 180%

7 Nail Enamel 23% 168%

8 Coconut Oil Pktyp 15% 163%

9 Shaving Preparations 14% 150%

10 Antiseptic Creams 27% 146%

11 Confectionery - CoughLozenge

29% 142%

12 All Air Freshners 48% 136%

13 Antiseptic Liquids 37% 136%

14 Acne Preparations 49% 135%

15 Packaged Tea 16% 133%

16 Cleaners - Utensil 10% 131%

17 Baby Oils / Massage 26% 130%

18 Glucose Powders 17% 128%

19 Liquid Toilet Soaps 57% 125%

20 Breakfast Cereals 40% 123%

21 Confectionery - Total Gum 27% 122%

22 Sqsh Crdls & Sft Drn 22% 121%

23 Biscuits 28% 120%

24 Milk Foods 21% 119%

25 Shoe Polishes 13% 119%

Personal Grooming categories (MAT May 2011 vs. YAG)

Middle India is keen on expanding their consumption basket with newer

categories“ ”

Source: Nielsen

Source: Nielsen


Middle India

Middle India

6. Steady women empowerment

As more girls are encouraged to pursue higher education, women empowerment is taking shape slowly but steadily. According to Nielsen’s study, while women in Middle India take 60 percent of the decisions pertaining to health and beauty within the household, they are no longer confined to just that. Moreover, women are increasingly playing a decisive role in the lives of their children. Nielsen found that more than 40 percent of the decisions related to children were taken by their mothers in Middle India towns. Additionally, women are also beginning to influence the purchase of electronics, with 31 percent having a primary say and 34 percent sharing the decision-making power with men.

It is encouraging to see that a majority of the population in Middle India believe in providing equal opportunities for boys and girls, with 75 percent people in smaller towns like Bhatinda voting for the idea, compared to 90 percent in Pune.

Though women empowerment initiatives have been taken, a lot more needs to be done before the impact of these programs is truly felt in society. Many women aim for tertiary education and making a contribution to the household income. However, certain inhibitions prevent them from achieving their goals. Nielsen research found that lack of safety, corruption of moral values and an inferiority complex were major roadblocks for the progress of women in Middle India. Over the next decade, the role women play in shaping the Middle India story should only move North given the upside.

Source: Nielsen

Source: Nielsen


7. Durables on the purchasing horizon

The penetration levels of durables in Middle India versus larger cities are vastly different today. Age-old durables like black and white televisions, table fans and air coolers, which have lost their popularity in metro cities, will still take some time to work their way out of Middle India. Interestingly, Nielsen data also highlights that ownership and upgrade of durables are one of the top priorities for Middle India.

Many families aspire to own luxury durables. When the time comes for an upgrade, goods which are considered necessities like pressure cooker, mobile phones, ceiling fans and color televisions top the list, whereas for new purchases, luxury durables like washing machines, refrigerators, vehicles and music systems are preferred. Given the current penetration levels of many basic durables, the improving financial condition of families, the aspiration to acquire, and access to consumer finance, Nielsen expects this market to be ripe over the next 5 years.

Source: Nielsen

Source: Nielsen


8. Mobile as a multi-faceted device

The mobile is a multi-faceted device for Middle India. The population in these areas is playing games on mobile phones, watching videos, and sending MMS clips at largely the same rate as larger cities. Nielsen research shows that only 6 percent of the total population does not own a phone for personal use. The mobile phone has replaced the landline in many homes. Even housewives carry their own mobile phone – albeit in many cases this is a hand-me-down. Interestingly, today almost three-fourths of the phones being used in Middle India are Nokia phones which will change in the coming two years with many affordable multimedia phones hitting the market.

More than 94% of the population

claims to own a mobile phone

for personal or office use.

Source: Nielsen


9. Cable TV dominance

Cable TV is king in Middle India and serves up as the main source of entertainment across age groups, providing marketers with a captive audience like no other.

10. Social media & internet readiness

Middle India has very low internet penetration—78 percent of Middle Indians have never accessed the internet—but those who have access are highly aware of social networking / micro blogging sites. The Middle India youth is in tune with the internet. Social networking, chatting, music, videos, gathering information, and career searches are all in scope with this segment of Middle India. Orkut prevalence among active internet users is higher for Middle India than even Pune!

On average, Middle India performs 3.2 activities online compared to 4.6 activities in a city like Pune. Interestingly, reading news online is an important activity for Middle India even more so than a tech-savvy city like Pune.

Source: Nielsen

Source: Nielsen

Source: Nielsen


11. Selective openness to western influence

The cultural fabric of the Middle India population has undergone a visible change. With the proliferation of the ‘mall’ culture and the penetration of cable TV, consumers are warming up to Western ideas. The youth, especially, are adopting trends in Western fashion apparel like jeans and tops, which wasn’t the case 5 years ago. However, absorption of this fashion is limited, with youngsters following their own brand of modernism, which combines Indian and Western values. The views of traditional families are found to be liberalizing too, which is reflected in Nielsen’s numbers: 28 percent parents have no qualms about their children staying independently and 22 percent are open to consumption of liquor in their homes. In a larger city like Pune, these numbers are surprisingly low at 16 percent and 6 percent respectively. In addition to this, the Middle India population prefers to use English as a medium of conversation and finds the joint family tradition to be more and more restrictive.

12. More to celebrate: prominence of festivals

The definition of festivals in Middle India has evolved to include not just Indian festivals, but also those beyond its geographic and cultural boundaries. For instance, even in small cities like Jhansi, youngsters exchange flowers and greeting cards to celebrate Valentine’s Day. The claimed festive expenditure has increased considerably for 48 percent of consumers, though it remains significantly lower than that of Pune at 81 percent. This increased expenditure may be largely attributed to the fact that consumers now prefer to purchase gifts and sweets from shops instead of preparing them at home.

What sets Middle India apart is the increasing number of days spent on festive celebrations – while 34 percent of consumers in Middle India state that the time they spend on festivals has increased in the last few years, the number stands at just 17 percent for Pune.

Source: Nielsen

Source: Nielsen


Consumer SnapshotMiddle India has a distinct personality. In some cases, there is a stark difference in the values and beliefs of the population in Middle India compared with that in the larger metros, understandably so, given the disparity in education standards, surroundings, upbringing, and other societal factors. Adopting a one-size-fits-all strategy, hence, may not help marketers achieve the desired results in Middle India. Knowing the pulse of various consumer classes would hold the key to success. While some Middle India cities will probably behave more like a mini metro others might come very close to being a neo-urban area etched with rural consumer thinking. Nielsen identified a few broad themes that could help marketers in decoding the Middle India consumer. While this is not an all-inclusive profile, it should help marketers appreciate the difference in consumer needs and aspirations vis-à-vis some of the larger cities and also recognize the need for consumer deep dives before a foray is made into these towns. Some attributes that can be associated with a Middle India youth, housewife and a working male professional are highlighted below.

Middle India youthThe Middle India youth are deeply attached to their customs and family. They prefer not to go against the wishes of their parents, even ready to marry someone who meets their parents’ approval. Despite harboring such traditional values, this segment, surprisingly, likes to be seen wearing the latest apparels. They not only use homemade remedies to enhance their appearance, but also follow the hottest fashion trends. The focus is on fitness, especially among males, and bodybuilding as a form of exercise and fashion is fast catching on. When it comes to technology, youth from Middle India towns gravitate toward modern gadgets. They are well-versed with the benefits of the internet and prefer flashing the latest mobile phones equipped with multimedia. They frequently visit malls, restaurants, food joints, parks, etc. and go sight-seeing with friends to nearby local destinations in their free time.

City-wise profile of the youth

Bhatinda: Nielsen found that youngsters from Bhatinda are quite ambitious and are open to exploring options outside their hometown. They take keen interest in information technology and use mobile handsets for varied purposes like internet browsing, SMS, chatting and multimedia. Besides experimenting with new cuisines, this group is highly influenced by Western culture and is glued to youth channels like MTV and UTV. In addition to this, Bhatinda’s youth are stylish and very brand conscious.

Nanded: Contrary to the youth in Bhatinda, the youngsters from Nanded prefer to settle in their hometown, preferably after pursuing education in larger cities. Nielsen research shows that internet penetration in the city too is lesser than that in Bhatinda. This segment prefers affordable mobile phones with basic functions like games, camera, FM radio, etc. Youth from this town frequent Chinese and fast food joints, and the young males pay special attention to their health by staying fit.

Jhansi: Compared to other cities, the youth from Jhansi are not very ambitious. Internet penetration is quite low, and youngsters are open to experimenting with cuisines, relishing Chinese food as often as possible. In gadgets, they prefer mobile handsets with features like FM radio, torch and games, which they consider essential. They are less brand conscious, and follow a simpler lifestyle compared to their counterparts in some of the other Middle India cities.

Anantapur: Youngsters from Anantapur are ready to explore other cities for better education and employment opportunities. As a result of relatively high internet penetration, the youth here are tech savvy and like indulging in computer games. This may be the reason why they prefer internet access on their mobile phones, besides common features like camera, games and FM. Due to their exposure to a slice of life in Hyderabad, which is located close by, they have experienced the culture of hanging out at Pizza and Burger joints.

Middle India housewivesInsights collected by Nielsen position a Middle India housewife as a budget conscious homemaker, who influences the brands that are included in her monthly grocery shopping. Interestingly, she is the main decision-maker when it comes to durables and home appliance purchases. Until a few years ago, a typical housewife was a conservative cook. However, today, she is ready to experiment, and is keen on trying out various convenience food items like readymade spices, instant pasta, processed foods, etc. In addition to these options, her kitchen is equipped with modern appliances like food processors, which reduce her cooking time and effort. She also likes to take a break from mundane kitchen activities from time-to-time and enjoys Indian soap operas and dining out with her family. The Middle India housewife is not very technology and internet savvy. Being conscious of tight monthly budgets, she prefers a simple hand-me-down mobile phone for basic features like calling and SMS.


City-wise profile of a housewife

Bhatinda: A housewife in Bhatinda would want to settle in a larger city after having spent many years in her hometown. She understands the value of education, and is a vocal advocate of higher academic options like post graduate degrees, professional courses and foreign studies. Housewives in Bhatinda are also fairly religious and regularly visit places of worship. The claimed frequency of these visits is high in Bhatinda as compared to other cities like Nanded, Jhansi or Anantapur. Their mobile phone usage is limited to calling, messaging, listening to songs, playing games and clicking photos.

Nanded: Unlike in Bhatinda, the housewives in Nanded prefer to migrate to their home towns after spending a decade or two in a metro or a larger city. They feel that the importance of festivals has decreased considerably over the past five years. Typically, their preference in mobile phones is limited to basic features like calling, messaging, torch and alarm.

Jhansi: Our research highlighted the strong belief housewives in Jhansi have for equal educational opportunities for boys and girls. As their mobile phone usage is limited, they are content with calling, texting, listening to songs and using the torch feature in their devices.

Anantapur: Most housewives in Anantapur have not moved out of their hometown, preferring to spend their life within its boundaries. They are highly inclined to buy products like pressure cookers, televisions, electric irons, ceiling fans, etc. According to Nielsen research, housewives from Anantapur show the highest frequency of eating out compared to those in other Middle India towns.

Working men in Middle IndiaA typical working man from Middle India is the ‘man of the house’ in the truest sense, as he takes most of the big decisions in household matters. He is methodical in managing the house, and most often is involved in daily grocery shopping, albeit aided by a to-do list. Whether it is financial or social issues or large purchases like electronics, automobiles or OTC drugs, Middle India’s working male wants to partake in the decission making.

As the main breadwinner, he is keen on securing the family’s future through a well-planned long term savings plan. Gold, property and fixed deposits are his preferred investment vehicles. He aspires to purchase consumer durables like a refrigerator or a vehicle, and provide the best education to his children with his savings. As someone who does not pay

too much attention to his style of dressing, the Middle-Indian working man scores low on the fashion quotient. However, a keen interest in healthy living and personal grooming has been noticed in his profile lately.

City-wise profile of a working man

Bhatinda: Most men in Bhatinda aspire to buy white goods like electronic washing machines or automobiles and upgrade their existing color television to a high-end LCD or Plasma TV. An increasing number of working men are now realizing the importance of fitness, and are consequently visiting salons and gymnasiums to enhance their appearance. In Bhatinda, the services of neighborhood moneylenders are used as frequently as banks by the man of the house.

Nanded: Most working men in Nanded believe that there is a paucity of jobs in their hometown, due to which their financial stability is impacted. Banks are the only preferred source of credit for this segment. Nielsen also found that many working men in this town aspire to travel by air in the next two years.

Jhansi: Nielsen data indicates that a majority of the working male population in Jhansi prefers living in their hometown. As compared to other Middle India towns, this consumer group has more in-depth knowledge of various investment options. As a result, there has been a steady increase in purchasing and learning more about life insurance policies in the past few years in this town. Unlike Nanded, the men in Jhansi do not restrict their credit source only to banks, and are open to borrowing from friends and close relatives. Working men in Jhansi prefer to go on planned holidays, a tendency which is higher in this town compared to others. The working male population here gives quite a lot of importance to a healthy lifestyle, not eating out very frequently, getting regular health check-ups and practicing Yoga on a daily basis.

Anantapur: Working men from Anantapur are indecisive when it comes to settling down in a particular city. For credit, they prefer neighborhood moneylenders over banks and other financial institutions. The average time this segment spends online is comparatively higher than that in other cities. Most working men in Anantapur either have a gym membership or practice Yoga regularly, which indicates that they value their physical appearance. Due to an improvement in lifestyles and increased awareness, a working man in Anantapur is optimistic about his general well-being, job prospects and the state of his personal finances in the coming year.


What does Middle India still need to thrive?While there is tremendous scope in the Middle India market, there are many areas that can be developed further to facilitate fast-paced growth in this segment. Without such improvement, the Middle India buoyancy will be curbed. Following are some of the aspects that need attention:

Employment opportunitiesJob opportunities across Middle India are not adequate yet to sustain its growth path. Research from Nielsen shows that only 38 percent of the Middle India youth is willing to stay back in their hometowns as compared to 62 percent in Pune. Although the tough job market today has forced students to settle away from their homes and families, they show a willingness to stay back if the employment scenario improves. Lack of employment has also led to a rise in crimes and even drug abuse in certain towns like Bhatinda. With many companies and retailers making sizeable investments in these towns, it is expected that the virtuous cycle will improve the job market overall. That said, huge private and public investments will be needed over the next few years to ensure that ample employment opportunities exist in the medium-to-long term. Job creation will be one of the largest determinants of growth in Middle India over the next decade.

Women empowermentAlthough the status of women in Middle India is improving, the fairer sex lacks adequate opportunities for employment and education. Moreover, certain inhibitions and perceptions are impeding their progress. For instance, parents are apprehensive about their daughters’ safety when they step out to work or pursue higher education. Teaching is considered a safe profession as it does not entail late working hours or traveling. Similarly, many believe that if a girl is well-qualified, it may be difficult to find a suitable groom for her. This, coupled with the age-old custom of dowry, is a major issue in Middle India towns like Jhansi. Interestingly, the amount of dowry expected tends to increase if the girl is highly educated, especially in smaller towns like Nanded. While women empowerment is happening in small doses, a lot needs to be done quickly if women are to play an equal role in the growth of Middle India.

Addressing water scarcityPaucity of safe drinking water is emerging as a pain-point in Middle Indian towns. Women in these areas need to wake up early every morning to collect water for the household’s requirement. This is a huge problem in towns like Nanded and Bhatinda, where people are forced to buy packaged water or water purifiers to meet their drinking water needs.

Higher educational facilitiesWhile most small towns offer an appreciable level of primary and higher secondary schooling, students are forced to migrate to larger cities for higher education. With a steady increase in the number of youngsters pursuing post graduate courses, there is a dire need to increase the number of colleges to cater to the demand. With professional degrees gaining prominence, more can be done to set up higher education infrastructure and organized coaching classes in these towns.

% Claimed source of borrowed funds

3

69

4 5

26

Neighbourhoodmoneylenders

Banks Cooperatives Friends/relatives

45

511

Pune Middle India towns

Job creation will be one of the largest determinants of growth in Middle India

over the next decade.“

”

Simplified BankingIn this age of internet banking, many Middle India denizens still rely on local moneylenders for their credit requirements. Almost 26 percent of the population still borrows from neighborhood moneylenders, whereas in a developed city like Pune, this number is a miniscule 3 percent. Such high dependence on moneylenders may be due to the population’s difficulty in transacting with the advanced banking system. This is apparent when only 45 percent of the Middle India population approaches banks to avail loans as compared to 69 percent in Pune. Reserve Bank of India data over the past 3 decades suggests that scheduled commercial banks’ deposit accounts in semi-urban and urban India have not grown as fast as accounts in rural and metropolitan areas – implying that there is a lot of opportunity to improve penetration of basic banking. Considering the propensity of consumers in these towns to save & invest in gold, property and fixed deposits, there is a huge opportunity for banks and other financial institutions to promote their products. However, to exploit this market, financial processes need be simplified to a large extent.

Source: Nielsen


Implications for Marketers

Market Sizing

The FMCG market in Middle India is expected to grow manifold in the next decade and a half. This predicted growth for the coming 15 years will be unprecedented, and will have huge implications for consumer product companies.

The Middle India market size of the FMCG sector, which is currently about INR 287 Billion (6 Billion USD), is expected to cross the INR 1 trillion (20+ Billion USD) mark by 2018 and INR 4 trillion (80+ Billion USD) by 2026. This signifies a remarkable opportunity for the next decade and a half.

The population in this region boasts of per capita FMCG consumption of over INR 2,800 (56+ USD) more than 2.3 times the figure for all-India. This number is estimated to reach INR 31,000 (620+ USD) by 2026, which will be more than double of what an average Indian will consume then. These numbers should be music to the ears of marketers and retailers who are planning to expand aggressively in the coming few decades. It is about time marketers started calibrating strategies to fulfill the needs of this segment.

Improvement in roads and infrastructureThe state of infrastructure in Middle India towns leaves a lot to be desired. From narrow roads to perennial work-in-progress, commuters face a harrowing time, and prefer to use public transportation for daily travel. In the last 3-4 decades, transport infrastructure has focused largely on metro and rural connectivity; these urban towns will need some attention in the coming decade. Connectivity will play a huge role in speeding up progress for Middle India and the government needs to do more to set up this missing link.

Entertainment optionsWhen it comes to entertainment, there is a dearth of options. Families and students are usually hooked on to cable television or frequent shopping malls, restaurants and parks in their vicinity for leisure. A moviegoing culture is yet to catch on among this section, as most cinema halls are considered inappropriate for women and families. Middle India wants to be entertained, and this industry has a lot of potential for growth in the coming decade.

Number of Deposit accounts in thousands (scheduled commercial banks)

1981 2009 Multiple

Rural 34,862 199,695 5.73

Semi Urban 43,690 169,725 3.88

Urban 33,878 142,272 4.20

Metropolitan 31,197 150,611 4.83

Source : Reserve Bank of India

Length of Roads (Kms)As a % of

total roads

Roads in Kilometers 1971 2008 1971 2008

Highways 711,966 2,473,267 78% 60%

Rural Roads under JRY and PMGSY

- 1,061,809 - 26%

Urban Roads 72,120 304,327 8% 7%

Project Roads 130,893 270,189 14% 7%

Total Roads (In Kms) 914,979 4,109,592 100% 100%

Source : Government of India (Ministry of Road Transport & Highways)

Source: Nielsen

Source: Nielsen


Implications for business

Ramp-up in the FMCG segment

The rise of Middle India is expected to drive spending to unprecedented levels. Since there is a vast scope and relatively less competition in this market today, existing players have registered impressive growth in the last few years. FMCG companies which anticipated this kind of growth and invested in these areas a few years ago, are reaping rich dividends today. The good news is that marketers who will act quickly even now, will be able to grab a sizeable portion of the market.

Marketers planning to penetrate the Middle India market in the coming years would do well to target the smaller towns with 1-5 Lac population, as these regions would record unprecedented growth in the coming few years and are less likely to have competition already well entrenched. The focus needs to be on building distribution infrastructure over the next 12-24 months. Current trends indicate that selling products in smaller packs through local business partners will drive sales for FMCG companies. Consumers are also increasingly indulging in impulse buying, signaling a strong growth for products in this category. Consumers base their decisions on affordability and convenience while making their choices. Marketers will need to cultivate their brands with Middle India and build loyalty now while habits are changing, so that they can flourish when spending increases manifold in the coming decade.

Personal grooming and hygiene in focus

The per capita expenditure on personal grooming and hygiene products is steadily increasing in the 1-10 Lac population towns. Today, this segment prefers to find homemade solutions for their grooming requirements. However, over time, requirements are expected to evolve and schedules to get busier, which would lead to a higher demand for personal care services like beauty salons, and boost the market for beauty and hygiene products. With an improvement in consumer lifestyle, an increased acceptance for newer products like affordable hair creams, deodorants, and shaving products is expected.

Shift in family consumption patterns

There has been a gradual rise in the number of nuclear families in Middle India in the past few years, and this trend is expected to accelerate in the next decade. For marketers, this would entail redrafting their marketing strategies and product offerings, as a change in the size of the family is likely to bring about significant transformation in consumption patterns. Moreover, communication and promotional strategies need to be targeted at a typical nuclear family in Middle India.

Smaller packs and customization of small-sized packages, homes, cars, etc. would address the specific requirements of smaller families.

Media evolution

While there has been some improvement in infrastructure in 1-10 Lac population towns, the penetration of internet is still negligible. Most consumers rely on cable TV for their information and entertainment requirements. This medium caters to a vast group of consumers—from youngsters, children, working men to housewives—and is expected to maintain its stronghold for the coming few years. Cable TV can hence become an ideal medium for marketers to promote their products among all age groups.

A very small percentage of the Middle India population, which mainly consists of youth in select areas, has access to the internet. This gap in the market can be tapped by internet service providers. Those who do have internet access are engaged in social media activities like their counterparts in bigger cities. Companies that offer youth-centric products can hence leverage social media marketing (along with a relevent TV campaign) to popularize their offerings, especially gadgets, personal care products, and cell phones.

Cuisines & Convenience

Fast food restaurants that are convenient, affordable and provide quick service find favor with not only the Middle India youth, but families too. Chains like Pizza Hut, McDonalds, and Dominos that provide an affordable menu and a Western ambience are considered strong contenders for a weekend family dinner outing. The lack of evolved options and limited experimentation serves up Burgers, Pizzas, and American cuisine as the next-in-line favorite to traditional Indian and Chinese fare. In the kitchen, the demand for fast-fix items is on the rise. With increasing dependence on time-saving food mixes, ready-to-cook foods, ready-made spices and prep kits, this is an ideal time for food brands to address this need and expand in these towns.

Marketers will need to cultivate their brands with Middle

India and build loyalty now while habits are changing, so that they can flourish when

spending increases manifold in the coming decade.

“”


Celebrations

The Middle India population celebrates festivals with great enthusiasm, which is reflected in their readiness to spend more time and money on them. Nielsen data highlights that this segment is heavily influenced by Western culture, especially when it comes to celebrating festivals, and is slowly shifting from traditional gifts to celebration packs and ready-made gift options. Besides, there is a rising importance of celebrations like Valentine’s Day, Mother’s Day, Teacher’s Day, etc. in the 1-10 Lac population towns. Considering that the trend is expected to attract even more consumers in the coming years, companies dealing in festive offerings like flowers, gifts, greeting cards, chocolates, etc. can expect a strong growth in revenues. FMCG companies can leverage this trend by focusing on seasonal, festive, and gift packs.

Mobility

More than one half of the Middle India households own a bicycle, about one-third own a 2, 3 or 4 wheeler and much less than one in twenty households own a car. With income levels in 1-10 Lac population towns on the rise and a steady increase in both the vehicle options and financing, consumers will gradually upgrade their vehicles from bicycles to two wheelers and from two wheelers to automobiles. Considering the size of population in the region, such upgrades will open up a huge market for automobile companies. Companies dealing in infrastructure development will see a growth too, as the Government will strive to provide better transportation facilities to match Middle India aspirations.

Entertainment & Leisure

Consumers will also look to spend more on leisure activities as incomes rise. Today not many options are at their disposal. Selective investments in customized and affordable entertainment options can yield big dividends in the next few years for companies dealing in entertainment and hospitality. Movie theaters that are a step above the single-screen theaters currently prevalent in most of these towns can encourage family movie outings and unlock a huge opportunity for the entertainment segment.

Women power in Middle India

While women are not the sole decision-makers in the household, their contribution to the decision making process will evolve over the next few years. Nielsen research found that men and women have an equal say in many of the products

they purchase, including food items. In addition to this, women are increasingly participating in big ticket household purchases like consumer durables and electronics. White goods companies should take note of these trends to design in-store consumer experiences and form promotional strategies to grab the attention of decision makers for their products.

When it comes to opportunities for women, Middle India is making slow but steady progress. However, longstanding problems like inadequate security and dowry still persist. Companies setting up shop in these regions that want to play a role in ensure women participation in the work force need to ensure the safety of their female staff through facilities such as pick up and drop, flexible work timings, etc.

Mobile telephony

Mobile phones have a stronghold in Middle India. More than 94 percent of the population claims to own a phone for personal or office use. Factors like affordability of handsets and cheap call rates are driving the growth of mobiles phones in these regions. Consumers, especially youth, are more open to experimenting with handsets, and are excited about newer technologies. If service providers offer better mobile internet services in small towns at affordable rates, it is likely that a wave of consumers will skip the computer-led internet access phase and unlock the power of the web through mobile devices. However, this is possible only if telecom companies make internet usage appealing, affordable, and relevant to the Middle India population.

Opportunities for other industries

Apart from scope for the sectors mentioned above, there is a huge gap in the Middle India region for the banking segment. While many national and international banks operate in this space, local moneylenders are still very prevalent. Offering simplified products and solutions can help banks make their operations viable.

With an improvement in lifestyle and rise in consumer awareness, a wave of health consciousness is sweeping across Middle India. Consumers are now willing to spend more on fitness activities in gymnasiums and yoga centers, which bodes well for fitness service providers, health-food players, and lifestyle product companies.

In addition to this, education is gaining importance in these towns. This could mean rapid growth for private schools, colleges, & organized coaching classes in the coming few years.


The Gold Rush has just begunAs educational levels rise, disposable incomes improve, and awareness increases, India will be a market worth betting on in the coming decade and a half. While the current inflationary environment is expect to curb the growth rates to some extent, the India story is still very much alive. We believe marketers should not lose out on the Middle India opportunity as they cash in on the metro and rural opportunities. Over the next few decades, opportunities in the metro areas will become relatively less enticing from an ROI perspective, while the demand revolution will continue in the smaller towns as the Indian middle class rises. Those that are reaping the benefits already have shown that building a distribution infrastructure quickly can play big dividends in Middle India. Companies that act today and start building their brand equity and loyalty base in these smaller towns will be able to cash in over the next decade. In a land of 8,000 towns and 6 Lac villages, these 400 towns account for 1 out of every 5 rupees spent in the country; marketers who ignore this future growth engine will do so only to their peril. What the metros achieved in the last few years, Middle India will achieve in the coming few. The India story and the demand revolution will live on through these Middle India towns.

Heterogeneity in Middle India Although the 1-10 Lac population towns share some common traits, this market is characterized by its heterogeneity, with each sub-segment showing strikingly distinct behavior patterns. The population in this area is scattered over a vast territory and comprises an assortment of people with different backgrounds, cultures, literacy levels, needs and desires. While some towns will behave like larger urban centres, others will mimic a more rural profile. This mix of consumers has huge implications for marketers. In addition, three major factors that will dictate the level of development of any town are penetration of the private sector, education opportunities and distance from a major metro city. A one-size-fits-all approach may not work for such a mixed market. An ideal marketing approach would be to study all these factors before developing a communication strategy or committing resources for expansion in a Middle India region.

Challenges before Middle IndiaAlthough the Middle India market holds immense potential for both global as well as domestic marketers, limited access to these towns due to sub-par infrastructure may put a spanner in the works. The growth in 1-10 Lac population towns would depend largely on the pace of improvement in education, employment opportunities and infrastructure development. Considering the fact that all these towns are not uniformly accessible by different modes of transport, the response to marketing activities and resultant growth is likely to be diverse and not very predictable. Moreover, lack of employment and educational opportunities for a prolonged period might compel consumers to migrate to larger cities, shrinking the Middle India market further.

While the consumer confidence index in Middle India regions is higher than that of many developed and developing markets, it remains lower than that of Indian metro cities. The success of marketing strategies for new products as well as already existing offerings, therefore, would rely largely on the consumption behavior, recent trends and opportunities in the targeted market. In such a situation, adopting the same approach for all Middle India areas would not be a very effective idea for marketers. Companies will hence need to base their decisions on insightful research and detailed market mapping before launching any product or service.

DOllar value has been approximated at $1 = 50


About this research

Several Nielsen assets were leveraged for this report. Consumer research across housewives (25-50), the youth (M/F; 18-24), and working men (35-50) was carried out in the summer of 2011 across the 4 Middle India centers of Bhatinda (Punjab), Anantapur (Andhra Pradesh), Nanded (Maharashtra), and Jhansi (Uttar Pradesh); Pune (Maharashtra) was selected as a benchmark city to represent a larger mini metro. Consumer research included waves of quantitative surveys as well as qualitative focus groups and all-day consumer immersions. Nielsen retail measurement insights and other assets were mined for the overall story. FMCG values exclude carbonated soft drinks and cigarettes and are based on Nielsen New Universe old Panel estimates as of mid 2011.

The author, Ranjeet Laungani [Delhi] would like to recognize Seshagiri Gudipudi [Bangalore], Anubha Gupta [Bangalore], Raji Nair [Bangalore], and Prochi Ginwalla [Mumbai] for important contributions to the project’s leadership and thank Abhishek Dadu [Delhi], Prateek Tripathi [Mumbai], Ishan Acharya [Bangalore] and Sonika Gupta [Delhi] for their substantial work on this project.

About Nielsen

Nielsen Holdings N.V. (NYSE: NLSN) is a global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence, mobile measurement, trade shows and related properties. Nielsen has a presence in approximately 100 countries, with headquarters in New York, USA and Diemen, the Netherlands. For more information, please visit www.nielsen.com.

Copyright © 2011 The Nielsen Company.

Dollar value has been approximated at: 1 USD = ` 50

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