Vinay Kumar

EPGP-10-078

1: Why CCI should invest in rural? What are the opportunities in rural markets for CCI?

Rural India should be target for CCI to invest. Mahatma Gandhi has said earlier India lies in
villages. Number of villages in India are more than the number of towns in urban areas. We
have seen from the case that that as per census around 68% of India’s population lives in
rural areas. Just by going by the number of people who lives in villages is so staggering that
it makes business sense to invest in rural areas of India. The expected growth in per capita
income of rural areas will help the CCI grow its revenue and profits. The sugar candies are
more liked in rural areas than urban areas.
Rural India has great potential, and which has been increasing over the years. Around 50%
of India’s GDP comes from rural markets. There is huge effort from government to reduce
poverty which will enable more money in hands of rural people for consumption.

2. What are the barriers for CCI to distribution in rural markets?

The barriers for CCI to distribution in rural markets are many. CCI has designed its route to
market for urban areas. The penetration of confectionary market in hardly 10% which will
help CCI to grow but they don’t have effective distribution mechanism to cater to rural
market. To start with the number of villages which are available to cater are too huge cover
them using route to market mechanism as the investment will be to huge.

3: Describe confectionery market in India. How is the market different in urban and rural
India?

Confectionary market in India with reveneue of approx. 6.5 Billion INR with ] CAGR of 12%.
It is expected to grow to 11 Billion INR by year 2014. Confectionary market volume is 193
million kg and is expect to grow to 264.4 million kg by 2016.In confectionary market
basically there are
Two type of player, unorganized confectionary manufactures and organized manufacturers.
Unorganized manufactures use local raw materials with cost advantage over organized or
large manufacturers and thus supply 35 % of confectionary, whereas large players like
Nestle and CCI source raw material from across the globe with brand image in their mind
and high quality. Large player have to compete with small or local players on price which
they do by relaying of increase market penetration with help of RTM.
Confectionary market is divided into a) Chocolates b) sugar candies and c) gums. They have
growth are as follows 20%, 5% and 9% respectively. Market share for the products are as
follows chocolates 46 %, sugar candies 34% and gum 20%. Indian confectionary market is
basically driven by two factors, offering to the customers and driving growth of the
company. Candy and gums are available in 5 million outlets so easily available to consumers
as compare to chocolate which has only 1.7 million outlets.
Confectionery penetration in urban market was 75% as compared to rural market which was
just 10% in year 2010. In rural market penetration of sugar candy was 15% as compared to
chocolates which has about 2%. Still distribution of confectionary product relay on kirana
stores which add to 76% of sales through them, convenience store 13.5% paan/beedi stores
10%.
Consumption of confectionary per capita in India was as low as 20gm only, whereas western
world is much ahead of this. In India western states consumption was 32% followed by
Northern Indian states 28%, south India 23% and then eastern India 17%. Normally sugar
candy was impulse purchase whereas chocolates where planned purchase. Urban
population was driven by brand and quality whereas rural population is driven by price.

4: Does the case have any hero (case protagonist), a dilemma or potential solutions?

In my opinion Shah and Gupta are the case protagonist who have dilemma about the route
to market to cater to rural customers using retails shops.

5: Identify the criteria on the basis of which evaluation and comparison of alternatives (or
potential solutions) for distribution should be made?
 a. Cost : Cost to reach rural client should be viable to run the business, shouldn’t
impact the working capital and should not hold the working capital for longer
duration in the hand of channel.
b. Sustainability: It should be able to sustain on itself after the initial investment.
c. Penetration: It should be able to penetrate deep in the rural hinterland.
d. Time : It should be able to able to reach the last mile in reasonable amount of
time

6: Evaluate the alternatives for distribution on the basis of chosen criteria and find out
which among the available options is best for CCI.

CCI should go ahead with hybrid model and should utilize the best of each model which
meets the requirement:

Superstockist model: This is the most reliable model which CCI can adopt. With this model
they can increase the reach by 63% remaining which earlier they had only 37%. They should
build their model keeping Superstockist in mind as they will be the supply line to product
availability for Haats and micro traders.
Micro Entrepreneurs – Mobile traders: These people will also going to play vital role in CCI
penetration to rural market. These people will play important role to carrying the product
from super stockiest to consumer. Also, they are can play important role in product
awareness in rural markets. This could be very cost effective model.
Self help group (SHG): As the socio-economic condition of rural women are changing. More
and more rural women are getting literate. CCI should look for empowering rural women
with micro finance. This will be again cost effective and sustainable model for CCI