The Rural Indian Consumer – Dissecting the $100B Opportunity

The Rural Indian Consumer – Dissecting the $100B Opportunity

Four key areas of consumption will help drive tens of billions of dollars in sales across rural India in the coming years.

Nielsen estimates that by 2025, the fast-moving consumer goods (FMCG) market in rural India will hit $100 billion and that inflation and pricing will be outstripped by consumption. Prashant Singh, vice president, Nielsen Delhi, identified premiumization, commoditization, indulgence and brand acceptance levels as the components of sales growth that would most matter.

Speaking at Nielsen’s India Consumer 360 Conference in New Delhi, Singh said it was critical that FMCG manufacturers and retailers focused on the unique needs of the rural Indian consumer shopping basket.


Four Key Trends Driving Increased Consumption

  1. Premiumization – Indian consumers are upgrading their shopping baskets with indulgent items that cost more. In fact, premium products are contributing the most (+21%) to FMCG growth than other price tiers.
  2. Commodity to Brands – As rural consumers experiment and adopt, they are switching out everyday commodity products like loose oil for the refined variety, which increased 44 percent every year in two years.
  3. Indulgence to Regular – What once may have been considered an occasional treat is now becoming routine. The salty snack category is a good example, which grew at a compound annual growth rate of 55 percent from 2009 to 2011 in rural India.

4. Acceptability – Increased exposure to the benefits of new products is leading to acceptance and a higher rate of return purchasing patterns.

Rural Shopping Baskets are Changing

Rural Indian consumers are changing their shopping habits and value-for-money purchasing is growing in importance. While small-sized packages are vital for entry into the market, as purchasing power increases, rural consumers are increasingly buying larger packs at a lower cost per serving. Retailers who cater to these changing needs by offering a portfolio of products that provide a value proposition will be poised for growth.


Sustainable Ongoing and Future Growth

Rural India, home to seven-of-10 Indian consumers, will be the driving force for continued and sustained growth in the future. A stable consumer base with high aspirations leads to higher affordability and consumption. Six-of-10 rural Indian consumers intend to stay living where they are today, which contrasts sharply with 43 percent of urban consumers that feel the same. However, when it comes to aspirations for higher education, fully 79 percent of both urban and rural consumers plan to pursue a professional degree.

And reaching rural Indian consumers today is becoming easier. Increasingly, rural consumers are upgrading technology—84 percent have a television and 80 percent own a mobile phone. And as smartphone affordability and accessibility continues to grow, Indian consumers may skip the third screen altogether. Today, only one percent of rural consumers and five percent of urban consumers have an Internet-enabled computer.

Future Spending Habits

What happens to the rural shopping basket when spending power goes up? Nielsen followed the spending habits of two rural Indian families over a three-week time period whereby income increased each week. The research showed that when spending increased three-fold, the housewife took on a greater role in the process, the number of products purchased increased and the type of products purchased was upgraded to premium varieties.

Three Tips When Marketing to the Rural Consumer:

  • Value for money is important. Large packs used for sharing with family and friends are on the rise. Offer SKU’s that meet rural consumer needs.
  • One-fourth of rural shopping takes place in the Haat (open-area farmers markets). Ensure your brand and message is reaching this channel.
  • Rural consumers believe copycat “fake” products offer the same benefit at half the price. Create clear product benefits that set your product apart.

In the continuously changing rural retail landscape, the “average” consumer no longer exists. Marketers who understand the evolving needs and aspirations of the various segments of rural consumer will be poised for success in this growing and dynamic marketplace.