WINTER PROJECT

STUDY OF OPPORTUNITY FOR FMCG PRODUCTS IN RURAL

AREA

STUDY OF OPPORTUNITY FOR FMCG PRODUCTS IN RURAL AREA.

WINTER PROJECT(2009)

SUBMITTED BY –PRAVIN TRIPATHI

UNDER THE GUIDELINES OF Mr. SIDDHARTH VARMA

DEPARTMENT OF MANAGEMENTIME SAHIBABAD

GHAZIABAD

CERTIFICATE

Certified that this MINI PROJECT titled “STUDY OF

OPPORTUNITY FOR FMCG IN RURAL AREA.” has been

prepared under the support and guidance of Sir Siddhartha

Varma. This project was given to me by Sir Siddharhta Varma

to make me aware of the steps of how to prepare a summer training

project.

Dated : (Signature)

SIDDHARTHA VARMA

ACKNOWLEDGEMENT

The same is happening with me when I am desperately searching

for words to thank the almighty god for making me an instrument

to write and prepare this project.

I am thankful to Sir Siddharth Varma for providing me support

and encourage to make and present this project.

I must also thank to my senior Arvind Singh to providing me

guidelines at regular interval.

finally thanks to Siddharth Varma sir without his moral support

this mini project could not have been a great success for me.

abstract

The mini project “study of FMCG products in rural market” Is prepared under the guidelines of Mr. Siddharth Varma (IIT, Faculty, IME). This project report provides a bunch of knowledge about demand of different FMCG products in rural areas as well it also provides a detail knowledge about the consumer preference towards different FMCG products.

The report also provides the details about the history of FMCG sector in rural India. There is a plenty of data analysis and conclusions are given in the research paper.

On the basis of feedback through questionnaire and observation method, I find out that the rural consumer has changed their strategy towards the products and starts to purchase them on the basis of their quality. As the result, there is close competition between the companies. As each of them are increasing their products, qualities, looks and providing better services everyday.

Our analysis is based on sample results. It was a difficult task to gather the information from respondents by meeting them personally in order to get questionnaire filled. There was a lot of time pressure and sometimes unwillingness of respondents to respond.

PRAVIN TRIPATHI SIDDRATH VERMA (SUPERVISOR)

CONTENTS

1. INTRODUCTION

2. LITERATRE REVIEW

3. RESEARCH MATHOLOGY

4. DATA ANALYSIS

5. CONCLUSION

6.REFERENCES

7. APPENDIX

Introduction

There was a time when the FMCG companies ignores rural market, they took no any interest to produced or sell products in rural market in India. It was the initial stage of FMCG companies in India. As per as the time had passed, the strategy and marketing style of FMCG companies had been changed.

Background of the study:- In 1970, Nirma was the first FMCG Company to initiate and produced goods according to rural consumers. In the early 1970s, when Nirma washing powder was introduced in the low-income market, Hindustan Lever Limited reacted in a way typical of many multinational companies. However, Nirma’s entry changed the whole Indian FMCG scene .It became a great success story and laid the roadmap for others to follow. MNC’s like HLL, which were sitting pretty till then, woke up to new market realities and noticed the latent rural potential of India. 1983, C K Ranganathan started selling shampoos in a sachet with an investment of Rs 15,000 and dared to take on the multinationals, Lever and P&G, the unquestioned leaders in that segment. . He targeted rural and small-town consumers who used soaps to wash their hair. He introduced the sachet at 90 paise and then reduced it to 50-paise. And that’s when the multinationals sat up and noticed him.Sales zoomed from 35,000 sachets to 12 lakhs. Initally they took any sachet, but after three months they restricted to Chik sachets.

Now at the present time, rural market is one of the best opportunity and focusing sector for the major FMCG

companies in India. Each and every company is set to invest a huge capital for competition in rural market. According to the Federation of Indian Chambers of Commerce and Industry, the number of rural households using FMCG products has grown from 136 million in 2004 to 143 million in 2007, a clear indication that rural consumers are shifting from commodities to branded products. Urban consumers, on other hand, could go slow on FMCG expenses, thanks for inflation spiral, rise in fuel cost and costlier credit. Evidence suggests that for the first time, the rural market has grown faster than the urban market in key product categories in April-May 2008, the latest months for which such information is available, according to market research firm AC Nielsen.  

Need for the Study:-

In those days, the rural market is the one of the best opportunity for the FMCG sector in the India. It is more wide and less competitive market for the FMCG. As the income level of the rural consumers increasing, the demand of FMCG is increasing continuously. The various need of the study is given as follows:-

To determine the raising demand of FMCG products in rural area.

Know about the different choices of rural consumers.

Definition of the Problem:-

The study of opportunity for FMCG products in the rural market is a sum total of different analytical survey of different FMCG products in the rural area. In one sense, we can say that it is determination of how much market captured by different FMCG companies.Scope of study:-

With a population of 1 bn people, India is a big market for FMCG companies. Around 70% of the total households in India reside in the rural areas. The total number of rural households is expected to rise from 135 m in 2002 to 153 m in 2010, which represents the largest potential market in the world.

Rural and urban potential

  Urban RuralPopulation 2001-02 (m household) 53 135Population 2009-10 (m household) 69 153% Distribution (2001-02) 28 72Market (Towns/Villages) 3,768 627,000 Source: Statistical Outline of India (2001-02), NCAER

An average Indian spends around 40% of his income on groceries and 8% on personal care products. A larger part of the total spending pie along with a large base (in terms of population) makes India one of the largest FMCG markets.

Changing lifestyles: Rising per capita income, increased literacy and rapid urbanisation have caused rapid growth and change in demand patterns. The rising aspiration levels, increase in spending power has led to a change in the consumption pattern .

Low penetration and low per capita consumption: Due to the large size of the market, penetration level in most product categories like jams, toothpaste, skin care, hair wash etc. in India is low. This is more visible when comparison is done between the rural and the urban areas. The average consumption by rural households is much lower than their urban counterparts. Existence of unsaturated markets provides an excellent opportunity for the industry players in the form of a vastly untapped market as the income rises.

Penetration %

As per given in the above chart, rural market shows a good improvement. In the presence of some product categories like, toilet soap, detergent bar, washing powder etc, it is

Category All India % Urban % Rural %Deodorants 2.1 5.5 0.6Toothpaste 48.6 74.9 37.6Skin Cream 22 31.5 17.8Shampoo 38 52.1 31.9Utensil Cleaner 28 59.9 14.6Instant Coffee 6.6 15.5 2.8Washing Powder 86.1 90.7 84.1Detergent Bar 88.6 91.4 87.4Toilet Soap 91.5 97.4 88.9Source: HLL investor meet 2006

same as in the urban level. Rural market is also improving in the other products category.Objectives:- There are following objectives of the project:-

To determine about the rural consumers preference towards FMCG products.

To know about the recent demand of FMCG products in rural area.

Hypothesis:-

I am also a citizen of rural area. I uses my experiences and perceptions as hypothesis towards to made this project.

Limitations :-

While surveying I encounter with some problems like some people were not willing to respond and few of them who responded were in hurry hence the active participation was lacking. Due to which we faced difficulties in collecting informations regarding our questionnaire. Another problem which we face was that people were hesitating to give information about their income. Except it, the sample size we have taken for survey was small and it’s a difficult task to draw accurate conclusion or reach to an exact result on the basis of limited sample size. Moreover, our investment was limited and time was also less to go in depth. Threats to us are that- as people were hesitating to

give their income details so there is chance of error regarding

income.

Organization of report :-

Institute of Management Education, Ghaziabad

Literature review:-

Rural market is one of the best opportunity for the FMCG sector. In some sense we can say that rural market is future of FMCG. As per research of Purba Basu, (faculty of ICFAI business school),the lifestyle of rural consumers is changing. Rural Indian market and the marketing strategy have become the latest

marketing buzzword for most of the FMCG majors. She added the strategies of different FMCG companies for capturing rural market like Titan’s Sonata watches, Coco Cola’s 200ml bottle,different strategies of HUL and Marico etc. She takes into consideration the study of National Council for Applied Economic Research (NCAER). According to the NCAER projections, the number of middle and high-income households in rural area. India is expected to grow from 80 million to 111 million by 2007. In urban India, the same is expected to grow from 46 million to 59 million. Thus, the absolute size of rural India is expected to be double that of urban India. According to Pradeep Tognatta, (former vice president of LG) The economic growth inIndia's agricultural sector in last year was over 7%, compared with 3% in the industrial sector.This implies a huge market potentiality for the marketer to meet up increasing demand. Factors such as village psyche, strong distribution network and market awareness are few prerequisites for making a dent in the rural markets. The model is of the stolid Anglo-Dutch conglomerate UnileverGroup, which has enjoyed a century-long presence in India through its subsidiary HindustanLever Ltd. It was Hindustan Lever that several years ago popularized the idea of selling itsproducts in tiny packages. Its sachets of detergent and shampoo are in great demand in Indian villages. Britannia with its low priced Tiger brand biscuits has become some of the success storyin rural marketing. Rajesh K Aithal of IIM(L) had done his research on rural telecome in India .He explain that Rural markets are an important and growing market for most products and services including telecom. The characteristics of the market in terms of low and spread out population and limited purchasing power make it a difficult market to capture. The Bottom of the pyramid marketing strategies and the 4 A's model of Availability, Affordability, Acceptability and Awareness provide us with a

means of developing appropriate strategies to tackle the marketing issues for marketing telecom services in rural areas. Successful cases like the Grameen Phone in Bangladesh and Smart Communications Inc in Philippines also provide us with some guidelines to tackling the issue.

As per concern of my research, it is a detail study of different FMCG products used by rural consumers. It will provide a detail information about consumers preferences towards a good number of FMCG products which is too unique and different from those above researches.

RESEARCH METHODOLOGY

SAMPLE DESIGN

SAMPLE UNIT: - All working people are included both the genders i.e. males and females irrespective of their education level.

SAMPLE SIZE: - 100

SAMPLE REGION: - Sahibabad Region, Gorakhpur

SAMPLING PROCEDURE: - Random Sampling

DATA COLLECTION METHOD

PRIMARY DATA:

Primary data was collected through a self administrated questionnaire. This questionnaire aims to gather information related to various Branded Electronic Home Appliances.

SECONDARY DATA:

Secondary data was collected through magazines, research papers, internet etc.

RESEARCH INTRUMENTS

QUESTIONNAIRE DESIGN:

As the questionnaire is self administrated one, the survey is kept simple and user friendly. Words used in questionnaire are readily understandable to all respondent. Also technical jargons are avoided to ensure that there is no confusion for respondents.

DATA ANALYSIS

After a good deal of consumer survey and marketing research, I has collect a good collection of data. The analyses of those data’s are given as follows:-

DATA ANALYSES FOR PREFERENCE FOR TOOTHPASTE IN RURAL MARKET:-

In the initial years, the rural consumers preferred tooth powers, datoons etc. but from the last decade, the preference of rural consumers towards toothpaste has been changed. A huge number of toothpastes of different companies are sell in rural market. Colgate, Pepsodent are the most popular toothpaste brands in rural market. The rural consumers preference towards the different toothpaste brands are given in following pie chart.

TABLE-1:- consumers preference towards different toothpastes

DEMANDS OF DIFFERENT TOOTHPASTE BRANDS

35%

30%

15%

10%

10%

PEPSODENT

COLGATE

CLOSE UP

BABOOL

OTHERS

As per analyses of above pie chart, we has found that Hindustan Uniliver’s Pepsodent leads the market with 35% rural market share. 30% of rural consumers prefers colgate as their favorite toothpaste brand, once again Hindustan Uniliver’s close

up occupies third position with 15% market share.10% of the rural consumers prefers Dabur’s babool toothpaste and 10% consumers uses other toothpaste brands.

DATA ANALYSIS FOR THE PREFERENCE FOR SOAP IN RURAL MARKET:-

In the survey of preference of my target consumers towards soap, I had found the different preference and different choice of the consumers.

On the basis of their choice, I has get the following data given in following table:-

DEMAND OF SOAP BRANDS

812

30

50

0

10

20

30

40

50

60

LUX LIFEBOY REXONA OTHERS

BRANDS

PE

CE

NT

AG

E LUX

LIFEBOY

REXONA

OTHERS

As per given in the above table, the 90% of the soap market is coverd by the products of Hindustan Uniliver.50% of rural consumers prefers HUL’s Lux, where as 30% goes towards HUL’s Lifeboy third position is also acquired by a HUL

product where 15% of the market captured by Rexona. 8% of rural consumers prefers some other soap brands.

CONCLUSION:- In this analysis , I fonnd that a vast majority of rural consumers prefers Lux as their more faithful brand.

DATA ANALYSIS FOR PREFERENCE FOR SHAMPOO IN RURAL MARKET:-

As per concern of shampoo , total 31.9% shampoo uses in rural market. It shoes a good number of consumers preference towards shampoo in rural area. From the last few years , the demand of shampoo sashes as well as medium size bottles has increased in rural area. Peoples of every age are interested to use shampoo at regular interval.

The preference of consumers towards shampoo is given in following table.

DEMAND OF SHAMPOO BRANDS

42

36

16

6

0

5

10

15

20

25

30

35

40

45

CLINIC PLUS SUNSILK CHICK OTHERS

PRODUCTS

PE

RC

EN

TA

GE

CLINIC PLUS

SUNSILK

CHICK

OTHERS

.

DEMAND OF SHAMPOO IN SACHE CATAGORY

3228

1812 10

05

101520253035

BRANDS

PE

RC

EN

TA

GE

HEADS &SHOULDERS

PANTENE

SUNSILK

CLINIC PLUS

OTHERS

The consumers preference towards shampoo are as follows:-

42% prefers clinic plus. 30% consumers prefers sunsilk. 10% consumers go through Calvin Care’s Chick. 8% consumers prefers other shampoos or non

shampoo users.Preference of shampoo in saches:-

32% of consumers uses Heads & Shoulders. 28% goes through Pantene. 18% prefers sunsilk. 12 % prefers clinic plus. 10% includes non shampoo users or users of some

other brands,

CONCLUSION:- This analysis shows that a vast majority of rural consumers prefers HUL’s clinic plus and Sunsilk in high and medium size sample. But on the other hand, in sachet sample there is different story. More than 50% of the rural consumers prefers the brands of P&G (Heads & Shoulders and Pantene).

DATA ANALYSIS OF CONSUMERS PREFERNCE TOWARDS DETERGENTS :-

Detergent is another more preferencable product for rural consumers. Approx 87.4% penetration level of detergent is gone to rural consumers. The preference of rural consumers towards detergents is given in following table .

DEMAND OF DETERGENTS

42

34

13

6 5

05

1015202530354045

WHEEL GHARI TIDE SURFEXEL

OTHERS

BRANDS

PERC

ENTA

GE

WHEEL

GHARI

TIDE

SURF EXEL

OTHERS

DEMAND OF DITERGENTS IN SACHE

43%

35%

12%

10%

TIDE

SURF EXEL

ARIAL

OTHERS

As per given in above table , the consumers preference towards detergents are as follows:-

42% consumers prefers HUL’s wheel in mediam or large sample , but consumers not prefer it in sachet.

34% consumers prefers ghari detergent in medium or large size sample, but not in sachet.

13 % consumers prefers P&G’s Tide in medium or large size sample but it is leading brand in sachet category with 43%.

Surf exel of HUL is second leading brand in sachet category with 35% consumer preference which is prefers only 6% in large samples due to it’s price.

5% consumers prefers other local detergents for their personal use.

CONCLUSION:- As given in the above table, lump sum the half of the detergent market is covered by HUL and P&G products. Nirma which was the initiator of introduction of detergent in rural market, is currently out of the market. this condition shows that the rural consumers are also want to quality products, only price is a factor in front of them.

DATA ANALYSIS OF CONSUMERS PREFERENCE TOWARDS UTENSIL CLEANER:-

Utensil cleaner is one of the basic need of the consumers, because consumers uses it at regular interval. Couple of months ago, the rural consumers does not uses any utensil cleaner rather they use primary products like ash, mud or other things. But at the present time the popularity of utensil cleaners has been developed in rural market in high penetration level. The consumers preference towards utensil cleaner is given in following table:-

0102030405060708090

100

IN (%)

VIM OTHERS NOCLEANER

BRANDS

DEMAND OF CLEANER BRANDS

VIM

OTHERS

NO CLEANER

As per given in the table, vim is the leading brand in the utensil cleaner segment. 85% of the rural market is covered by vim , 10% consumers prefers other brands where as 5% consumer are those who does not uses any utensil cleaner.

DATA ANALYSIS FOR RURAL CONSUMERS PREFERENCE TOWARDS FAIRNESS CREAM:- As per fairness cream is concern, there is not more brands are in the competition. Only few brands of HUL and emami captures the market.a brief description is given in the following table.

DEMAND OF FAIRNESS CREAM

65

23

102

0

10

20

30

40

50

60

70

FAIR &LOVELY

PONDS VICCO OTHERS

BRANDS

PE

RC

EN

TA

GE

FAIR & LOVELY

PONDS

VICCO

OTHERS

The HUL’s Fair & Lovely is most popular brand in the rural market most of the consumers specially female consumers uses this brand. Approx 65% of rural consumers uses Fair & Lovely as their best trusted brand. Second position is also occupied by HUL’s product (Ponds) which is preferred by 23% of

consumers, 10% consumers prefers Vicco and 2% uses some other brands.

RURAL CONSUMERS PREFERENCE TOWARDS SAVING CREAM:-

Generally in the rural areas the consumers prefers barbers for the purpose of saving or other relevant purpose. But in the semi-urban areas and some of the rural areas, consumers are started to depend on their own saving kit. So what from the few years, the demand of different savin creams of different companies has been increased. A brief analysis of different brands of different companies is given in following table:-

The preference of consumers towards saving cream is described as follows:-

42% of the consumers prefers Palmolive as their best choice.

30% consumers prefers Vjohn. Gillete which is most demandable brand in

urban areas has very low market share in the rural market due to it’s little bit high price.

After saving gel is generally not popular in the rural market.

CONCLUSION:-

The analysis of consumer preference toward saving cream shows that such a vast area of market covered by Palmolive and Vjohn.

PREFERENCE OF CONSUMERS TOWARDS BISCUITS:-

Biscuit is one of the major beverage category brand of the FMCG products for the rural areas. Consumers prefers it for the many reasons like taking with tea, giving to guests, baby food etc. there are many companies exists in this segment.

A brief overview of consumers preference towards biscuits is given in following table:-

DEMAND OF BISCUIT BRANDS

62

23

105

0

10

20

30

40

50

60

70

PARLE-G SUNFEAST BRITANNIA OTHERS

BRANDS

PE

RC

EN

TAG

E PARLE-G

SUNFEAST

BRITANNIA

OTHERS

Parle-G is very old and most trusted biscuit brand for the rural consumers. From many years , consumers prefers it due to it’s low price, good taste, and availability. At the present time, it captures approx 62% of total rural market share. From the few years ITC’s Sun feast creats a good demand among the rural consumers. 23% of rural consumers prefers sunfeast and also it’s demand is increasing due to it’s taste and good publicity and distribution. Consumers prefer 10% Britaania brands and 5% consumers prefers other brands.

CONSUMERS PREFERENCE TOWARDS DIFFERENT TEA BRANDS:-

In the segment market, generally consumers had prefer local tea , but from the few years they starts to use some brands of the different tea companies because of the avaibility of tea in small sachets. The following table provides a brief details about the different tea brands popular in the rural market.

DEMANDOF TEA DIFFERENT BRANDS

32%

26%

21%

11%

10%

TAZA

TATA TEA

DOUBLE DIMOND

TAJ MAHAL

OTHERS

the data analysis of consumers preference towards tea is discussed as follows:-

32% consumers prefers taza as their best choice.

26% of the rural consumers prefers tata tea. 21% of the rural consumers prefers double

diamond. 11% consumers prefers taj mahal tea. 10% consumers are among those who prefers

some other tea nrands.

CONCLUSION:-

As per given in the above table taza and tata tea are the leading tea brands in the rural market.

DATA ANALYSIS OF CONSUMERS PREFERENCE TOWARDS DIFFERENT HAIR OIL BRANDS:-

The rural consumer preferences towards different hair oil brands are given in the following table:-

DEMAND

31%

25%

21%

18%

5%

HERBAL OILS

DABUR AMLA

PARASUIT

BAJAJ ALMOND

OTHERS

rural consumers prefers mostly herbal/cool oils, e.g- Navratna, himtaj, Himgange,etc. 31% of the rural consumers prefers herbal oils because of their multipurpose use. They use these oils as medicine also. 25% of the rural consumers prefers dabur amla, third place occupied by Maico’s Paraschut which is prefers by 21% of rural consumers. 18% consumers prefers Bajaj Almond and 5% prefers some other hair oil brands.

CONCLUSION:

As I has analyzed the various data based on questionnaire, a fact

has came into light that HUL’s products are the most known and

popular Brand in context of home FMCG products in rural market

followed by DABUR, ITC and P&G. Because of huge product

line, cheaper cost, brand loyalty, good publicity and advertisement,

the rural consumers generally prefers the products of HUL in all

segments.

Except it, people firstly prefer for good quality and comparatively

low prices products .

SUGGESTIONS

The rural market is very large in compare to the

urban market as well as it is more challenging market. The

consumer wants those products which are long lasting, good, easy

to use and cheaper. The income level of rural consumers is not as

high as the income level of urban consumers that’s why they want

low price goods. It is one of the reason that the sell of sachet is

much larger in the rural area in all segments.

It is necessary for all the FMCG major companies

to provide those products which are easy to available and

affordable to the consumers. It is right that the profit margin is

very low in the FMCG products, but at the same time the market

size is much large in the rural area. The companies can reduce their

prices by cutting the costs on the packaging because the rural

consumers don’t need attractive packaging. Application of 4A* is

also a major task for the major companies in this area.

(*4A= Availability, Affordability ,Acceptability, Awareness)

appendix

QUESTIONAIRE:-------

NAME:-OCCUPATION:-TOTAL INCOME: - A) BELOW 6000 p.m___ B) 6000 TO 12000___ C) MORE THAN 12000___.

ADDRESS:-

DIST.:-STATE;-PHONE NO.:-

1) WHICH TYPE OF TOOTHPASTE YOU USE? A) PEPSODENT__ B) COLGATE__ C) CLOSE UP__ D) OTHERS__.

2) WHICH DETERGENT YOU USE? A) SURF EXEL__ B) TIDE__ C) NIRMA__ D) OTHERS__.

3) WHICH SOAP DO YOU USE? A) LUX__ B) LIFEBOY__ C) REXONA__ C) OTHERS__.

4) WHICH SHAMPOO USES BY YOU? A) SUNSILK__ B) HEADS &SHOULDERS__ C) PANTENE__ D) OTHERS__.

5) WHICH UTENSIAL CLEANER USE BY YOU? A) VIM__ B) OTHERS__ C) NO CLEANER USES__

6) WHICH TYPE OF SAVING USE BY YOU? A) GILLETE__ B) PALMOLIVE__ C)OLD SPICE__ D) OTHERS__.

7) WHICH FAIRNESS CREAM USES BY YOU? A) FAIR & LOVELY __ B)POND’S__ C)VICCO__ D) OTHERS__

8) WHICH TYPE OF TALC YOU PREFER? A) DENIM__ B) PONDS__ C)BORO PLUS__ D) OTHERS__

9) ANY DEODERENT USE BY YOU……………. A) AXE__ B) REXONA__ C)Fa__ D) OTHERS__.

10)WHICH BLADE YOU USES FOR SAVING? A)555__ B) 7 ‘O’ CLOCK__ C)WILKINSON__ D) OTHERS__.

11) WHICH BISCUIT YOU PREFER? A) PARLE-G__ B) SUNFIST__ C)BRITANNIA__ D) OTHERS__