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Rural Marketing

-Rural marketing, Definition, Scenario, Rural

consumer behavior.
• -Market segmentation, product and pricing,
Distribution, Rural marketing strategies,
Marketing of consumer durables.
• -Marketing of agricultural inputs, traditional
marketing of farm products, defects in
agricultural marketing, Grading, storing and
processing, External trade in agricultural
Reference Books
• Sanal Kumar Velayudhan (2007), “Rural Marketing-Targeting the
Non-urban Consumer”, Sage Publications, New Delhi.
• 1. Krishnamoorthy, R (2008), “Introduction to Rural marketing”,
Himalaya Publishing House, Mumbai.
• 2. Badi, R V and Badi N V (2007), “Rural marketing”, Himalaya
Publishing House, Mumbai.
• 3. Balram Dogra, Karminder Ghuman (2008), “Rural marketing -
concepts and practices”,. Tata McGraw-Hill Publishing Company
Ltd., New Delhi.
• 4. Krishnamacharyulu, C S G, Lalitha Ramakrishnan (2002), “Rural
marketing Text and cases”, Pearson Education (Singapore) Pvt. Ltd,
• 5. Pradeep Kashyap, Siddhartha Raut (2006), “The rural marketing
Text and Practices”, Himal Impressions, New Delhi.
• 6. Habeeb-ur-Rahman, K S (2004), “Rural marketing in India”,
Himalaya Publishing House,Mumbai.

• 1. Indian Journal of Marketing

• 2. Journal of Rural Development
• 3. Brand Reporter
• 1) Marketing Strategies of CavinKare Ltd.
• 2) Purchasing practices of food, clothing and consumer
durables among farm families of Gadag District in Karnataka
• 3) TTK - Prestige Pressure cookers
• 4) NDDBs Kaira district co-operative milk producers union Ltd
• 5) Agriculture Marketing Committee- A play
• 6) E-Choupals of ITC
• 7) HUL Sakthi
• As per NABARD, all locations upto a
population of 10,000 will be considered as
rural. Market existing in those areas is
rural marketing.
• General definition- Any market that exists
in an area with less than 10,000
population, low density of population and
without significant infrastructure facilities is
rural marketing.
Census of India (2001)
• Urban
• Minimum 5,000 population, 75% male
workforce in non-agricultural activities and
population density is over 400 persons per
sq km.
• All municipalities/corporations,
cantonment board or notified town area.

• RBI- less than 10,000 population

• FMCGs- up to 20,000 population
• Consumer Durables-
• below 50,000 population

• 6.38 lakhs villages and over 70% of the people

(120 million families) live in these villages.
• Traditional blacksmith, basket and rope making,
carpentry, iron works to prepare agricultural
implements, mason works for rural housing, retail
trading, pot making, leather works, spinning and
weaving, traditional handicrafts, fishing, diary,
poultry etc..

• oil processing
• tailoring,
• comb making,
• flour milling,
• rice milling,
• plumbing works,
• repairs,
• electrical works etc.
Rural Occupation
Occupation Jan-June 2004 (National Sample Survey
Organisation) %

Self-employed in Non agriculture 14.40

Agriculture labour 27.40

Other labour 8.90

Self-employed in Agriculture 35.60

Others 13.50
Rural Marketing Stages
• Before 1960s-focus was on agricultural produce such as
paddy, wheat, cotton etc.
• Rural to urban and rural to rural.
• 1960-70- Green revolution led to the increased use of
agricultural inputs.,
• Rural to urban, rural to rural & urban to rural.
• 1980s-Demand for consumables and consumer durables
through the efforts of HLL,ITC, Colgate, Godrej, Phillips
• Sachet revolution started during 1978-80 with Valvet
shampoo followed by Godrej, Dabur, Tiger biscuits,
close up, parachute etc.
How rural consumers are
different from urban
• Agricultural • Manufacturing and
• Near to nature • Isolated from nature
• Less density • More density
• Homogenous • Heterogeneous
• Fewer contacts with • High contacts
outside world
Changing Attitude of the Rural Consumer
From To
Pre-liberalization Post-liberalization

 Powerless/submissive  Informative/outgoing
Settle for less Stretch for more
 Reluctance, avoidance  Seeking experience
 Abstemiousness (‘not for us’)  Affordable indulgence
 Destiny driven and resigned to  Struggling and aspiring for a
fate better life
 Simple needs  State need of hour
Rural Segmentation

6,38,000 Villages
743 Million People
111 Million (Middle & High income group-
62% Villages (more than1000 Population)
3% above 5000 Population
Less than 500 Population do not have
(National Council of Applied Economic
Profile of Villages

Distribution of Villages

Population No. of Villages Percentage of Total Villages

Less than 200 92.541 15.6 Hardly any shops in

these 220,000
200-500 127,054 21.4 villages
501-1000 144,817 24.4
1001-2000 129,661 21.9
17% of villages
2001-5000 80,318 13.5 Account for 50% of
5000-10,000 18,758 3.2 Rural population &
60% rural wealth
*Total no. of villages 593,154 100

*Inhabited villages; total number of villages is 6,38, 691

Source: Census 2001.
Potential for RM
• India’s 74 % population has 58% of country’s disposable
income due to increasing incomes, infrastructure like
roads, communications, literacy etc.
• Rural consumers own only 54% of consumer durables
i.e. each house hold is having three consumables as
compared to urban population having seven consumer
durables by an average household (NCAER, 1998).
• Rural markets help to reduce the risk during recession in
urban area.
• HLL derive 50% of its revenues from rural areas
• General impression is that the rural
marketing is mainly for agricultural inputs
• Had opportunities to market modern
goods and services such as consumer
goods, durables, financial services,
education, health care, telecommunication
etc. in addition to agricultural products
• Worlds 12.4 % rural market lies in India
(120 million house holds).
BOP-8 billion population
Potential of Rural
Most of the times except agro based companies
are not serious in rural marketing.

Only when sales saturate in urban markets, they go

to rural.

However, rural market experts feel Rs.1,23,000

Crore rural market has the potential to double.
1. Untapped potential for FMCGs

• The total market for durables and non-durables in rural

areas is more than urban, though the average
consumption is less than urban.
• The essential items including food products is large in
rural areas.
• There is a huge potential for nail polish, lipsticks, face
cream, shampoo, mosquito repellents in rural areas.
2. Durables

• Purchase and use of items like sewing machine,

cassette recorder/radio/transistor, wristwatches, table
fan, black and white TVs, pressure cookers etc. are
more in rural areas.

• The large population and the low consumption indicate

opportunities but geographical dispersion; income
variations suggest the challenge of serving rural people.
3. Banks
• Rural markets have potential for banking
• Only 42 per cent rural households have
bank accounts
• Only 21 per cent only have access to
credit from a formal source.
4. Health
• ORG-MARG survey indicates
pharmaceutical sales in rural areas is only
Rs.28.71 billion compared to Rs.155.34
billion total sales of the country.
• NCAER survey, the rate of illness in rural
areas is more than urban and therefore
demand is more.
5. Communication
• A Gartner forecast revealed that Indian cellular services
revenue will grow at a compound annual growth rate
(CAGR) of 18.4 per cent to touch US$ 25.6 billion by
2011, with most of the growth coming from rural markets.
• A joint Confederation of Indian Industries (CII) and Ernst
& Young report reveals that of the next 250 million Indian
wireless users, approximately 100 million (40 per cent)
are likely to be from rural areas, and
• by 2012, rural users will account for over 60 per cent of
the total telecom subscriber base in India.
Consumer Behavior

• Getting market share is not possible within a

short period due to low literacy, low income,
seasonal demand and problems of
transportation, communication and distribution.
• The number of middle and high income
consumers in rural markets is almost equal to
that in the urban markets
• Hence, there is a need to understand the rural
consumer behavior, attitudes, beliefs and
aspirations of people.
• Rural consumer has limited education, less exposed to
products and brands, choose price over quality and is
influenced by word-of-mouth communication. However, it
is changing with increased incomes, situational factors,
consumer needs and the market reach out rural
• Increased demand for batteries due to non-electrification
of many areas. TVs and radios that withstands electricity
voltage fluctuations are preferred in rural areas.
• Automatic washing machines can’t be used due non
pipeline water supplies, washing powder can’t be if it is
at streams and ponds. Bicycles and mechanical
watches, radios or transistors etc have more demand
due to use pattern.
Categories of Spending

 Gold
 Education
 Health care
 Purchase of land
 Conveyance (Durables)
 Cell phones
 Other Products
• Region South, West, East and North
• Density of Population >2,000
• Climate Hot, Humid, cold and Rainy.
• Every company is targeting to cover villages with
>20,000 each
• South are willing to accept the high tech products
because of higher literacy.
• Talcum powder in South.
• Bullock carts of Western and Estern U.P differ in the
size of the tyres. Western UP speak of Hindustani
and Eastern U.P. Bhojpuri.
Demographic segmentation
• In rural areas head of the family make
purchase decision.
• Now – a –days school going children are
influencing purchase decisions.
• Gender (Male/ Female), Age and Family
Size influence.
• Marketers are targeting the younger a lot.

• Mobiles, cycles, TVs

• Demand is Erratic
• Farmers (35-40%) own one third stock of
• Shop keepers, service occupants
consists of only 15-20% but 45-60%
durables are with them.
Place of purchase

• Only 5% of rural population bought

durables from rural outlets.
• Shaving preparations, bulbs, balms,
toilet soaps and washing powders are
also purchased from nearby towns.
Social and behavioral influences
• Word of month communication spreads.
Asian paints launched bright coloured paints in
a pouch form with the name of Utsav (festival).
It painted headman’s house before the festival
and post office. (Brand was well accepted by
rural people).
• Youth and children influence purchases as
children are sent to shop to buy the products
without naming the brand.
• Opinion leaders influence.
• Retailers influence with credit etc.

• Toilet soaps and tooth paste are usually

private in urban but it is not for rural like
• Non-durables are usually bought once in
a week from haat and durables like
clothes etc. from melas where women
are allowed.
• Traditional population oppose
Packing, Price & Quality

• Packing and price- Small packs.

• Quality and price- Usha sewing
machines at premier price due to quality.
Brand preference

• Brand (Local / Regional Specific)

(Eg: Tractors, Fertilizers, Chit fund Companies)
• National brands of
Nirma, Lifeboy, Chavanprash, skin creams
are preferred in rural areas also.
• But within a household multiple brands consumed
like soaps.
• Splendor is popular because of its quality.

• The appropriate media for rural markets is not the

same as used for urban markets.
• The print media or magazines not preferred in rural
areas particularly women.
• Wall paints, Posters, TV in the most preferred mass
media (36%), followed by print media (23%), radio
(20%) and cinema (9%).
• Neighbours, friends are major source of information
Case: Purchasing Practices
• Purchasing practices of food, clothing and
consumer durables among farm families of
Gadag District in Karnataka.
• By Dr. P R Sumangala
• Mr. Yallawwa Uppar
• University of Agricultural Sciences, Dharwad.
• (Indian Journal of Marketing, December,2009)

• -Survey conducted in 3 Taluks in Gadag District.

• -5 % of the villages in each Taluk (10 villages i.e.3
from Gadag, 5 from Ron and 2 from Nargund)
• -Purposive sampling technique of different land
holding families selected such as landless, small,
medium and big farmers.
• -20 households from each village comprising of 5
samples from each category.
• -Total 200 households with 50 households
from each category.
• -Self structured questionnaire was formed
and required data was collected by
personal interview method.
• -Data was coded, tabulated, analyzed and
interpreted by using suitable statistical
• Maximum households purchased
• 1.The groceries, perishables, ready to eat
mixes and bakery on weekly basis from
nearby towns.
• 2. Daily wear of women, men and children
purchased once in six months where as
occasional wear were purchased during
festivals from the shops located in the
nearby town.
• 3. Majority of the respondents from all the land
holdings adopted cash payment system in
purchasing of food, clothing and consumer
• 4. More number of families from Medium and
Big farmers owned greater number of
consumer durables and they adopted credit and
installment system in purchasing of tractors and
• 5. Neighbours and friends were the common
source of information for purchasing of food,
clothing and consumer durables from families
of different landholdings.
Marketing Strategy
• Marketing strategy basically involves effective
use of the marketing mix to explore the rural
• Marketing mix indicates appropriate combination
of four P’s for achieving marketing objectives.
• Four P’s for product, Price, place and Promotion.
These are interdependent and any change in
one variable will have an impact on the other.
The challenges of four A’s such s acceptability,
affordability, availability and awareness comes into
Product and pricing are important aspects.
Out of the following listed strategies, one has to
select options that are appropriate according to
market segment and the product category in order
to have a success in rural market.
– 4 P’s -4 A’s

• Product - Acceptability
• Price - affordability
• Place - availability
• Promotion - Awareness
I. Product and Acceptability
• Post liberalization has changed from
simple needs to better life style with more
information, stretching for more.
• Changing with increased incomes,
situational factors, consumer needs and
the market reach out rural consumer.
• It is the most tangible and important single
component of the marketing.
• It is the engine that pulls the rest of the
marketing mix.
• Product is anything that satisfies human
wants and includes product quantity,
benefits, design, style, colours, brand,
services and warranties.
II. Pricing and Affordability
• It is important to both seller and buyer.
• In the competitive economy, price is determined by free play of demand and
supply. Price will go up and down with changing supply and demand
• Pricing decisions influence sales volumes, profit margins, trade terms and
conditions, advertising, sales promotion and product image.
• Price refers to exchange value of the product and includes
(i) Maximum retail price
(ii) Discounts
(iii) Credit
(iv) Terms of delivery and
(v) Maintenance charges
Low price
• A rural consumer is price sensitive due to low levels of
income. But once he is satisfied with quality, he will continue
to patronize the same.
• For many FMCG, Rs 5 is an appropriate price to attract new
customers. It has been observed that pens, razors, biscuit
packs, toothpaste, washing soaps, soft drinks costing
around Rs.5 have slowly started selling in villages.
• Eg: Lifebuoy soap 60 grams @ Rs 4.50 sales are 40:60 IN
urban: Rural
• 5kg cylinder of BP instead of 14kg
Discounts to dealers,
• (i) Trade discount for wholesaler or retailer usually wholesellers get
3-5% and retailers 7.5 – 10% discounts for consumer products like
soap, tooth paste, biscuits, hair care products.
• (ii) Cash discount
• (iii) Quantity discount for total volume of purchase during a
certain period or at a time.
• (iv) Off – season
• (v) Promotion allowances for advertising, delivery van operation,
display products
• (vi) Promotional schemes during crop harvesting period like
exchange offers, festival offer, special discounts, product
introduction etc.,
Value engineering
• Low margin & High volume
• Ex: Nirma – Affordable price, medium quality,
availability at village shops and focus on rural mass
• Rupees 5 price point
• Ex: Coke & other soft drinks consumers increased
from 16 crore (2002) to 24 crores (2004)
• Ponds talc, Cold cream, Rin, Fair & Lovely etc
III. Place and Availability
• Distribution channels in rural marketing
and penetrate into rural markets are
• HLL, ITC, Ever-ready, Dabur, Nirma are
some of the organizations who have good
• The distribution from producer to consumer requires a
large number of intermediaries and this increases
overhead costs. There are about 52 lakh retail outlets
in India out of them, 17 lakh outlets are in urban and
35 lakh outlets are scattered in about 6.30 lakh
villages servicing to rural outlets is a challenge.
Distribution system has two sub – divisions i.e.,
• (1) Channels of distribution and (2) Physical
Channels of Distribution

• The channel members are wholesalers

and retailers who are middlemen in
distribution and they perform all marketing
functions. Channel members are useful to
producers well as consumers. These
channels may be of different types –
• 1. Manufacturer  consumer
• Ex: Rhythu bazaars, Village artisans
• 2. Manufacturer  Retailer  consumer
• Ex: Mahindra & Mahindra tractors
• 3. Manufacturer  distributor  Retailer  consumer
• Ex: Agri – chemicals
• 4. Manufacturer  C & F (Carrying and Forwarding)
Agents  Distributor  Retailer  consumer
Ex: Colgate, HUL, Parle
Physical Distribution

• Physical distribution activities include order processing, handling &

goods, packing, warehousing, transportation, inventory control,
banking and customer service.
• 1. Company owned delivery vans
• Ex: Bharat petroleum has introduced rural marketing vehicle
(RMV) in Punjab in 1999, it moves from village to village and fills
LPG cylinders.
• 2. Hired vans
• Ex: HUL use hired vehicles to reach to rural retailers
• 3. Bullock carts or camels – for remote villages.
• 4. Mobile traders
• Ex: People move from house to house by bicycles or on foot.
• 5. Syndicate distribution
• Ex: A firm manufacturing edible oils and one
dealing in biscuits, tea and coffee could jointly
service rural retailers.
• Cavin kare used the distribution network of
Amrutanjan company for chick shampoo
• 6. Satellite Distribution
• Ex: HUL, Nestle, Marico have appreciated
stockiest to service the village merchants and
the merchants get stocks from stockiest.
• 7. Haats: Traditionally on certain days of a week both sellers and
buyers meet in village to buy and sell goods and services.
• Participation of companies would not only promote products
but also understand the shared values, beliefs and perceptions of
rural consumer. Haats are generally held where the population is
>2000. Each haat covers surrounding 15 – 20 villages.
• Ex: parachute oil, tiger brand biscuits are promoted through haats.
• 8. Melas: these are different types i.e., commodity fairs, cattle fairs
and religions fairs and may be held only for a day or may extend
over a week.
• Ex: kisan mela in Ludhiana is an annual Mela. Maruthi have
been able to book cars.
• - HUL, Colgate, Britannia
New channels
• HLL, ITC, Ever-ready, Dabur, Nirma are
some of the organizations who have good
• E-Choupals (ITC)
• SHG (Prestige, HUL)
• Unemployed youth, Integrated outlets
(Coromandal) etc.
IV. Promotion & Awareness
• To communicate effectively, it is important to understand the
aspirations, fears and hopes of rural customers. Even if one
company had a national strategy it has to act locally.
• Ex: Shampoo in Rajastan
• - Education instead of promotion for interaction
• - Customization, Regionalization.
• - Mass media – TV in the most preferred mass media (36%),
followed by print media (23%), radio (20%) and cinema (9%)
• Outdoor media: Wall painting, video vans etc.,
Nagarguna Urea

Colgate Add
Cocacola Add

Thumsup add

Pepsi Add

Santoor soap Add Rin & Surf Add

 Un–conventional platforms: Mandis, Haats/
Melas (faires) mainly religious like kumbh mela at
Haridwar, Allahabad. FMCG giants like HLL, P& G
set up branded kiosks.
 Marketing & Research Team (MART)
conducted survey & found these places are
• - Pilgrimage sites
• - Rural games
• - Primary health centre
• - Schools
Alternative Media for rural marketing:
• To reach illiterate and less privileged Nautanki,
Puppet shows, Burrakata, Folk theatre for social
protest against injustice like Naxalism.
• Internet: e-choupal
 Innovative & Special promotion
• Ex: Scare crow, Midwife, uniform to rural
postman, One on One contact, demonstration
like motor-cycles.
Rural Marketing Strategies
• Key Elements to be considered
• Cultural diversity,
• Lifestyle,
• Standard of living,
• Disposable income,
• Consumption pattern and
• Communication facilities available
1. Competitive strategy

• Examine the conceptual framework of

Michael Porter’s five force model strategy.
• a) Supplier: The Company has to make
high quality products but also sell at
cheaper price. This is possible only when
company has suppliers who can supply
quality raw materials at cheaper price.
• b) Customer power: The word of mouth is very crucial in
rural markets. The retailer has a high bargaining power
but it can be neutralized through promotional and brand
building efforts that create consumer pull, which forces
the retailer to stock a particular brand.
• c) Potential Entrants: Local and regional players offer
terms more attractive than the existing players. The
servicing of existing company is up to expectations of
retailer like non – supply of products in time etc., would
allow new entrants. Then, it is difficult to regain the
position it lost.
• d) Substitute products: Counterfeiting is
prevalent in rural markets due to illiteracy,
low awareness and dependency on retailers.
Ex: Cool drinks. Hence, companies should
focus on packing and brand identity to
counter the substitute products.
• e) Competitors: Retailer may be keeping
different brands but only selected brands are
sold more as per advantage of retailer.
2. Product Strategy
• Product mix modification to suit the rural
conditions as ‘Splendor’ for rugged terrain.
• a) Understanding of valued product- Rural
consumers are extremely aware of
equation of price, quantity and image.
• One should concentrate on these aspects
rather than frills.
• b) Packing: Size of pack to affordability,
storability, display ability matters. Packing is one
of the most important components in the
marketing mix.
• c) Branding strategy Product has to be at
reasonable price, packing, communication and
target audience in their understanding
• d) Logos and Symbols: These are important as
most of the rural markets should be done in a
manner to maintain low cost, refill packs etc.
Corporates Presence in Rural India
ITC Nirma

Coromondal – Super

HLL – Micro credit / ICICI

Life style Products


Mahindra & Mahindra

Product strategies used by
companies in rural markets are
• a) Sturdy products: Rural consumers believe that heavier the item,
higher the power and durability-Eg-Bullet, Rajdoot, Ambassador
• b) Designing products: Development of new products to suit field
• Ex: PVC shoes, Chappals, Sampoorna TV which can withstand
Power fluctuations (LG Electronics ) Large wheel base motor cycle,
chota coke.
• c) Small unit packing: Ex: Tiger Brand biscuits, Ponds 20 gram
talcum powder, Cavin kare’s 4ml – 50 paise chick shampoo, Rasna
• d) Utility products: Rural people are more concerned with utility than
the appearance/ show.
• e) Branding – Brand name also conveys quality of the product.
• Ex: Lal saboon (Lifebuoy)
• Coconut tree (parachute)
• Amul (NDDB milk)
No frills product

• Product cost can be brought down by reducing

the sophistication
• Ex: Maharaja appliances – washing machine.
• Refill/ Reasonable packing
• Ex:Coffee
Hiring Strategy

• Hire rural background graduated on

regular pay and also use the services of
unemployed rural youth at village level
Social Strategies
• Not only selling a particular products but
look at and relate into the holistic
development of the society.
• Ex: Encourage primary Education,
Partnership with NGO’s, Employment of
rural youth.
Marketing of FMCG

• Fast moving consumer goods are very frequently used, sometimes

daily and relatively faster at the retailer end. Such as toilet soap,
washing cake, bars, soaps, edible oils, tea, washing powder, liquid,
salt, biscuits etc.,
• The biggest player in rural market is HLL followed by Colgate, ITC,
Jyothi labs, Eveready and LG Electronics.
• - HLL derive 50% of its revenues from rural areas
• - ITC Choupals
• - HLL introduced Surf in 1959. Karsan Bhai Patel (Nirma chemicals)
started Nirma in 1969 and revolutionalised and it is the largest seller
• - Coca Cola India ltd.
Indian FMCG Journey So far..
“LACKLUSTER” STAGE – 1950’s to 1970’s
STAGE - Post Liberalization (1991 - 2000)
• “DROP” STAGE – (2000 – 2005)
• “BOOM REVISTED” STAGE: 2005 onwards
Product use and Customers
Product /Customer Men/Farmers Women Youth Children

- Mango √
- Mahalacto √

- Asha

-Thumpsup √√ √ √ √
√√ √ √ √

- Parley-g √ √ √ √
- Tiger √ √ √ √
√ √ √ √
- Crack jack √ √ √ √
- Good day
Economic Value Creation

Nirma HLL (Wheel) HLL (Surf)

Sales ($ Million) 150 100 180

Gross margin (%) 18 18 25
Return on capital employed (%) 121 93 22

Source: John Ripley, Senior Vice President, Unilever PLC.

Consumer Durables

• Durable goods are the one that usually last over

an extended number of uses.
• The consumers purchasing these items are
spending the savings of few months or years on
these articles and want to be double sure on the
long time performance.
• Only about 26% households have TV sets, <4%
refrigerators, <1% washing machines, radios are
>67% households.
Product use and Customers
Product /demographic Men/Farmers Women Youth Children

Motor cycles √ √

Televisions √ √ √ √

Tooth paste
- Colgate √ √ √ √
- Close up √ √ √ √

- Santoor √ √ √ √
√ √ √ √
- Lux √ √ √ √
- Lifebouy
- Rin √ √ √ √
- Surf √ √ √ √
√ √ √ √

- Chik √
√ √
- Clinicplus √ √ √
- Head&Shoulder √
Untapped potential for FMCGs and durables:

• The large population and the low consumption indicate

opportunities but geographical dispersion; income
variations suggest the challenge of serving rural people.
• The essential items including food products is large in
rural areas.
• Purchase and use of items like sewing machine,
cassette recorder/radio/transistor, wristwatches, table
fan, black and white TVs, pressure cookers etc.
• There is a huge potential for nail polish, lipsticks, face
cream, shampoo, mosquito repellents in rural areas.
Case:TTK-Prestige Pressure cookers
• When its sales have saturation during 1999, it has started
exploring the rural market. It has launched pilot project in
Mahaboobnagar district on 2002 with the help of marketing &
research team (MART) utilizing the SHG movement. There
were over 4 lakh SHG in A.P during 2002. Dealers have
started demonstrating and educating SHG members
• The project involved
• - Appointing women as the dealers of the prestige.
• - Setting up an assembly plant in A.P
• - Using rural women as employees.
Agriculture scenario
• Agricultural contribution to GDP has come down
to 20-22% (2003-04) from 56% (1951-52) but
the volume of population depending on the farm
sector has not reduced proportionately
• The productivity levels of 0.95 tones per hectare
during 1961-63 enhanced to 2.00 tones per
hectare by 1990.
• India is the third largest producer of food with an
annual output of 600 million tones

• Total area  329 Mill

• Total cropped area  190 Mill hectares
• Net area  142 Mill hectares
• Net irrigated area  54.6 Mill hectares
• Population  1027 Millions
• Rural  742 Millions
• No. Of villages  6.5 lakh
• No. Of rural markets  36,000
• Official languages  18
• We are worlds largest producer of milk 100 million
• 2nd largest producer of rice 88
• 2nd largest producer of wheat 72
• 2nd largest producer of sugar 25
• 1st in pulses 15
• 1st in fruits and vegetables 185
• 4th in poultry 46.20 billion
• Meat 4.45 million
• Fishery 6.50
• 3rd largest in cotton 27 million
Inputs Marketing
• Consumables – seeds, fertilizers,
manures, pesticides, animal feeds,
veterinary products, energy (Electricity,
petrol, diesel oil, baskets etc).
• Durables – farm machinery, irrigation
equipments, construction materials
(cement, bricks) transport equipments
(tractors, trailers, tempos, carts etc)
sprayers etc.,
I- Seeds
• Green revolution of 1965 – 70 was mainly with high
yielding dwarf varieties and seed played major role.
Government has also initiated following steps:
• - Seed Act of 1966 regulating quality of seeds sold –
labeling, certification
• - Amendment of Industrial licensing policy in 1987 which
removed restrictions on investment of foreign
• - Seed policy of 1988 for free important vegetable and
flower seeds.
• - Commercial cultivation of BT cotton.(2002)
• Indian seed market was about Rs. 3,000 crores (2004-
2005) excluding to farmer exchange among themselves
Seed companies
• Public sector: State farms, NSC, State
seeds corporations.
• Private sector - MAHYCHO (Mahindra
Hybrid seeds co. Ltd) Indo – America
Hybrid seeds Ltd., Bangalore.
• Nuziveed seeds, Hyderabad, Nath seeds,
Aurangabad, Raasi seeds, salem etc.,
Seed production and Distribution

• Seeds are living organism and has limited

shelf life and highly seasoned. The
package contains germination, Physical
purity, Inert materials, moisture, genetic
purity, shelf life, MRP etc.,
• Distribution is through distributors who get
5 – 7.5%, retailers (10-15% margin)
• Our country is one of the leading seed
producing centers due to favorable
climatic conditions. Total cropped area is
190 million hectares i.e., one of the
highest in the world. Irrigated area is 55
million hectares.
• Pest resistance verities are a challenge.
• The fertilizer consumption has increased
dramatically from 2.66 million tonnes (NPK) in
1971 – 72 to 18.07 million tonnes in 1999 – 2000.
• This is one of the important factors for increased
food grain production of 105 million tonnes in
1971 to 212 million tonnes in 2003 – 04.
• The consumption for rabi is 53.40% and kharif
season is 46.60%. U.P is the highest consumer of
fertilizers (Sugarcane, paddy) followed by A.P,
Maharastra, Punjab and West Bengal.
• Fertilizers marketing is about Rs. 30,000
• India is 3rd largest producer and
consumer of NPK fertilizers. Some of the
important companies are IFFCO,
KRIBHCO, Nagarjuna, Godavari, Zuari,
Plants require 16 elements
• Those are carbon, hydrogen, oxygen,
nitrogen, Calcium, Ferrous, Managanese,
Zinc, etc., Carbon from carbon dioxide of
air, oxygen from air and water and
hydrogen from water. Balances of all
elements from soil.
• They are relatively bulky materials to
physical conditioning of the soils
• Green manure
• Compost
• Fertilizers prices are subsidized by government to encourage its
usage and to maintain uniformity. Different geographical zones are
allotted different quantities. Fertilizer industry co – ordination
committee (FICC) fix retention price. Govt. Subsidies increased from
Rs . 505 crores in 80 – 81 to Rs, 16,000 crores in 2004 – 05. to
reduce the cost of all fertilizers except urea.
• Pricing: fertilizer prices are segmented by government to encourage
its usage and to maintain uniformity. Different geographical zones
are allotted different quantities. Fertilizer industry co – ordination
committee (FICC) fix retention price.
• General prices during 2003 – 04
• Urea – Rs 483/quintal
• DAP – Rs 935/ quintal
• MOP – Rs 445/ quintal
• Complexes – Rs 698/ quintal
• Crops are subjected to the attack of pests like
insects, fungi, bacteria and viruses and the loss
is estimated about Rs. 20,000 crores.
• There are different methods of control such as
physical, biological, cultural and chemical
• The chemical control is common and they are
insecticides, fungicides, weedicides and
• The consumption of pesticides varies
depending on crop, agricultural conditions,
pest incidence. Cotton and paddy account
for about 50% of pesticides consumption
in our country. The peak consumption is
during July –October.
• The share of insecticides in value terms is
65%, fungicides 15%, weedicides 17%
and others 3%
• Multinational - BASF, Buyer,
Cheminova, Dow, Dupoint, Syngenta
• Indian companies – Excel Industries,
Indofil, Nagrjuna pesticides ltd.,
• Public sector – Hindustan Insecticides
Ltd., State agricultural industries.
• Products are formulated in different forms
such as liquids, dusts, granules and WP
and in different concentrations.
• 1. Bio-fuel/ethanol Industry
• 2. Organic products
• 3. Medicinal and aromatic plants
• 4.Floriculture
• 5. Mushrooms
• 6. Biotechnological inputs-Biotic and abiotic tolerant
varieties, high nutritive value varieties production.

• Tractors are mainly used for farming operations,

transportation and as a power source. Tractor
sales are about 2.5 lakh per annum and it is 4th
in the world ranking
• The tractor density in India is 10 for 1000
hectares and it is lower to world average of 50 –
60 tractors per thousand hectares. The tractor
sales are fluctuating 2.7 lakh in 1999 – 2000, 1.7
lakhs in 2002 – 2003, 2.47 lakhs in 2004 – 05.
Hence, Indian tractor industry is looking towards
• Details India World % Rank
Total area 329 mill ha 13,387 2.5 7
Land area 297 mill ha 13, 048 2.3 7
Arable land 162 mill ha 1,387 11.7 2
Irrigated 57 268 21.3 1
Crop 212 2,100 10.1 3
Tractors 2.4 mill 32.0 7.5 4
Classification of tractors
• Less than 30 HP – Small
• 31 – 40 HP – Medium
• > 40 HP – Large
• The mid – segment of 31 – 40 HP is the core of the tractor
industry in India.
• Company wise market share
• Company Market share (2004 – 05)
• Escorts 12.8
• International Tractors Ltd., 11.3
• M&M 26.5
• TAFE 22.3
Tractors Accessories
• The implements are Disk harrow, Disk
Plough, leveler, mounted mould board
plough, trailers etc.,
• Potential: custom hiring, contact farming,
corporate farming, Organized retailing will
boost the demand for tractors in addition
to transport segments.
Market for outputs/agriproducts
• Unorganized market is subject to
malpractice of middlemen. Only 40 – 60%
of the price paid by consumers goes to
• These are primarily three types of players
involved in marketing of agricultural
produce such as Govt; Private and Co –
Post Harvest Losses
• Post harvest losses Rs.58,000 crores per annum that is about 30%
of total food production.
• The food grain losses worth of Rs.10,000 crores are equal to what
Australia produces in a year (20 MTs).
• Fruits and vegetables worth of Rs.30,000 crores is more than what
UK consumes in a year.
• The losses are in the process of transport, high moisture at the time
of storage, birds pickings, threshing loses, rodents in the field and
storage and insects in the storage. The losses at different levels:
• Farmers 15%
• Traders 4%
• Agents 2%
• Wholesalers 1%
• Retailers 8%
Processing Industry
• India’s processed food industry accounts for 14 per cent
of the total industrial output and 6.5 per cent of GDP.
• It employs over 15 lakh people or nearly 20 per cent of
industrial force but hardly 2% of the produce is
processed as against 80% in Malaysia, 78% in
Philippines, 70% in Brazil and 30% in Thailand.
• Level of processing in India:
• Fruits & Vegetables 2%,
• Poultry 6%,
• Milk 35%
• Marine products 8%
• Government play an important role. These steps include
establishing regulated markets, constructing warehouses, grading
and standardizing produce, standardizing weights and measures,
providing maximum support price and providing market prices
through AIR etc.,
• - Directorate of Marketing and Inspection under the Ministry
of Agriculture is responsible for administering federal statistics and
conducting market research concerned with the marketing of
agricultural produce.
• - Commission for agricultural costs and prices decides
minimum support price (MSP) for selected crops.
• - Food corporation of India was established in1965 to
procure and distribute through public distribution system. PDS is a
network of 3.5 lakh fair price shops that are monitored my state
• Central & State warehousing corporations are operating from
1980s to store agricultural produce.
Regulated Market Yards
• There are about 6,640 (1991) regulated markets under
state governments ( Marketing departments) to which
central Govt. provides assistance in the establishment of
infrastructure and in setting up rural warehouses. Under
these market yards, agricultural produce is sold through
open auction by commission agents or the brokers or
some other auctioneer in the presence of the seller or his
agent and the competing traders. The offer of the highest
bidder is accepted with the consent of the seller. The
seller has the discretion to refuse if he feels bid is too
low. They also provide storage facilities and advances to
Private Sector
• Farmers sell most of their produce in the
private sector to traders who are also
moneylenders. Other ways of selling are
• 1) Weekly village market (Haat)
• 2) Traders who come to village
• 3) Directly to rice mills or some other
processing or corporate sector.
Co – operative Sector
NAFED (National agricultural Co-operation Marketing
Federation) of central Government established in 1958
as an apex body of state marketing federations to handle
domestic and export marketing.
• Large co-operative enterprises such as milk, sugar,
spinning mills, edible oils handle marketing operations.
Sugar production of about 50% is coming from co-
operative sugar factories.
• Organised retailing: They will be beneficial to both
farmers and consumers because better supply chain
management and due to elimination of middlemen.
Case study: NDDB
• (NDDB) Kaira district co-operative milk
producers union Ltd established on 14th Dec
• They started supplying to Bombay Milk scheme
and it led to sound foundation for future growth
under the leadership of Mr.Verghese Kurien.
• During1940’s milk collection of 250 liters/ day in
Anand expanded to >1000 villages collecting 60
lakh litres and distributing them across the
country (2004).
• Amul is the product of Anand milk union Ltd.
Defects in Agricultural marketing
• 1) Lack of organization among producers because of small and
marginal farmers.
• 2) Forced sale due to indebtedness that is influenced by number of
• - Farmers borrow money from money lenders for cultivation
• - Uneconomical land holdings.
• - Lavish spending during festivals and marriages
• - Indebtness passed from generation to generation
• - Lack of market information
• - Inadequate transportation facilities.
• 3) Superfluous middlemen
• Too many intermediaries between farmer to consumer
• 4) Multiplicity of market charges upto 20% goes to meet various expenses
• - Commission
• - Brokerage
• - Handling charges
• - Weighment charges
• - Samples (shared by buyer & commission agent)
• - Rent for storage
• 5) Mal – Practices in unregulated markets
• - Weighment, Sample, differential price for same grade etc.,
• 6) Lack of grading specifications
• 7) Inadequate storage facilities – usually for storage in earthen cylinders, pits lined
with strong mud/ Concrete. Storage losses range from 1.5 – 2.5%
• 8) Poor transportation system
• 9) High cost of borrowing
• 10) Lack of standard weights and measures
• 11) Adulteration
• Ex: Damping of cotton by middlemen
• - Small chippings stones in rice.
• - Salt with chalk
• 12) Lack of marketing information
Regulated Markets
• Market committee consists of nominees of state
Govt, local bodies, traders and farmers pre –
committee formulates rules and regulations and
market fee various 0.5 – 2%. Disputes from
buyer & seller are settled by committee
• Objectives:
• - Ensure a fair price to producers
• - Provide congenial environment for business
• - To stabilize the prices
• - To provide common place for buyer & seller

• - Location not in proximity

• - Payment delays
• - Presence of middlemen
• - Working hours
• - Lack of information on incentives
• - Malpractices by corrupt officers and employers
• - Management not on democratic lines
• Many state governments have established
terminal markets by amending agricultural
product marketing committee act. Ex: Rhythu
bazaars in A.P & T.N
Organized Retailing
• Retailing is the largest industry in the world
• India ranked second most attractive retail market
after Russia as per Global Retail Development
Index 2004 brought out by AT Kearney.
• Estimated $ 350 billion retail marketing in India.
• Most of the retailing is under unorganized
sector and only 3% is in the organized sector.
• About 70% of retail trade is concentrated in food
and grocery products (milk, grain, vegetables,
fruits) and fast moving goods (soaps, detergents
• It involves division of products into classes
made up of units of similar characteristics.
• Ex: - Tea graded as BOP (Broken Orange
Pekol), OP and Dust
• - Staple length in cotton
• - Moisture, inert materials in grains.
• - Germination % in seeds.
Types of Grading
• a) Mandatory – GOI fixed standards and grades
for Agriculture commodities meant for exports.
• b) Centralized – Subject to inspection and audit,
co-operation, private agencies, farmers
associates. Items covered are ghee, curd, milk,
edible oils, jam, juices etc.
• c) Variable – Farmers fix their own method of
Advantage and problems of
• Advantages:
• Grading helps in fixing of price.
• - Quality assurance
• - Facilitates selling
• Problems:
• - Many products have no standards
• - Poor testing facilities
• - Even the graded produce may perish by the time it
reaches to consumer
• - Each and every product grading is a different task
• The directorate of marketing and inspection (DMI) headed by
agricultural marketing advisor (AMA) to the GOI implements
marketing programmes of the central government under DMI and
maintains a close liaison between central and state governments
through its regional offices. The directorate has specified grade
standards for various agricultural products under the agricultural
products grading and marketing Act 1937.
• AGMARK label indicates the quality and purity of the product based
on the prescribed standards.
• There are about 15,000 licenses who are marketing their produce
under AGMARK certification. There are 718 approved grading/
testing laboratories consisting of 111 state owned, 549 licensed
private packers, 9 co – operative and 49 private/ commercial labs.
DMI has 22 regional Agmark labs with its central Agmark lab at
Bureau of Indian Standards (BIS)
• Previously known as Indian standard Institution (ISI). The ISI Act
was passed in 1952. It is managed by board members consisting of
central and state governments; research institutes, labs and
development boards. Its activities are two fold – formation of Indian
standards and their implementation by promotion and through
voluntary and third party certification system. ISI label is an indicator
of the quality of the product.

• It has central lab at Delhi, regional labs in Chennai, Mumbai and

Kolkata. It has prepared standards for 14,000 products covering
agriculture, chemicals, Civil, Mechanical, Electrical, Electronic,
Textile etc. ISI has 2,000 standards covering agriculture inputs such
as fertilizer, seeds, pesticides agricultural machinery. ISI is
compulsory for exports and for government rate contract.
• Another example of the bottom of the pyramid targeting
at work is eChoupal in rural India. ITC manages an
agricultural trading company. To eliminate the
inefficiencies in its supply chain caused by corrupt
middle men at local rural markets, it created a network of
“e-Choupals” (choupal = village square) in rural
communities. Through these e-Choupals, individual
farmers have been able to check the market trading
price of their produce and sell it directly to ITC. Both the
individual farmers and ITC have increased their
revenues, because the layers of ineffiency no longer
have a role in the transaction between seller and buyer.
• Rojamma is a single parent living in a
small village in Mahabubnagar district in
Andhra Pradesh. When her husband left
her, she earned a few rupees working in
her mother's field but found it difficult to
support her two daughters. Then she
joined a women's self-help group and
found out about Project Shakti.
• Rojamma has opened an outlet in their village and started
selling Unilever products. She has started making profit of
Rs.2,000 per month. By the end of 2004, over 13,000
women entrepreneurs were selling to 70 million
consumers in 12 states (a 30% increase in rural
population reached by Hindustan Lever). By the end of
2006, 30,000 Shakti entrepreneurs reached 1,00 000
villages in 15 states. Shakti has brought them self-
esteem, a sense of empowerment and a place in society.
As Rojamma says: "When my husband left me I had
nothing except my daughters. Today everyone knows me.
I am someone now". It has meant she has been able to
send her daughters to school, giving them the chance in
life she didn't have