Top brands chase rural niches to boost sales

BANGALORE: A couple of decades after the FMCG companies’ proverbial discovery of a pot of rural gold, companies higher up the consumption ladder: automobiles, jewellers, scotch whisky makers, financial service providers et al are eyeing rural niches with strong purchasing power to top-up revenues.

Maruti Suzuki, the $7-billion auto major, which has a 40% share of domestic four-wheeler sales, has identified about 300 rural niches in last five years, which today account for 10% of the company’s domestic revenues. The company reached out to niches such as potato growers in West Bengal, blue pottery makers in Jaipur, timber merchants in Gujarat, turmeric growers in Tamil Nadu, granite polishers from Hyderabad, painters from Madhubani in Bihir and nut and bolt manufacturers in Sonepat among many others to beat the 2008 slowdown. Having seen traction, it’s an enthusiastic marketer to the rural niches now.

Simply put, rural niche is nothing but India’s spread-out hinterland-wealth driven by commodity cycles and increased economic activity. “The rural opportunity is really an ocean of niches. There is not one rural, but thousands of rural niches and each niche is an opportunity,” said brand-expert Harish Bijoor.

“The initiative to identify ‘niche segments’ was to take the rural drive to the next level. The idea was to go granular in our approach. And we found that there were numerous small segments within the economy that were doing better than the rest,” said Mayank Pareek, COO (marketing and sales), Maruti Suzuki India. This calendar, the auto major will add another 30 plus niche markets for greater rural penetration.

Jewellery and saree retailers down south have followed a similar rural niche strategy in expanding their footprints to smaller towns after analyzing sales data in the nearby cities of Kochi, Trichy, Coimbatore and Kozhikode.

“Kerala’s leading jewellers, Malabar Gold, Kalyan and Bhima, have 20 to 25 stores across the state. The state doesn’t have 20 to 25 cities that go on the map in terms of population,” said Amit Bagaria, founder chairman of Asipac, a real estate and retail consultancy firm, which has tracked the emerging tier-II retailing. “We know of similar trends in neighbouring Tamil Nadu,” he added.

At the advent of the telecom boom, mobile operators had similarly latched on to hidden niches, like the fishermen on the long coast-line, to improve penetration. Even global alcoholic beverages companies have tapped in to the rural niche story, from wealthy farmers in Punjab to prosperous planters in south India. While brands like Famous Grouse scotch whisky have mopped up bulk of their India sales from Punjab, LVMH Moet Hennessy has targeted commodity planters in the south to boost sales of its Hennessy Cognacs.

Financial services have tracked the rural wealth keeping tabs on commodity prices. “Every time there is a spurt in the price for any one commodity, you will see heightened activity in stock broking. And you know which commodity is doing well because the stock broking activity emanates from specific commodity growing areas,” said C J George, MD, Geojit BNP Paribas Financial Services, which closely tracks rubber, pepper, coffee and cardamom prices in the southern states.

Analysts believe that it makes sense for retailers to look at identifying specific rural segments sliced by both geography as well as occupation. Private and nationalized banks have chased Kerala’s Gulf money, with particular focus on certain districts. For instance, the banking reach in Pathanamthitta, in central Travancore region of the state, is remarkably high. “This town by far sees the highest number of bank branches per person in the country,” said George.