emerging rural & small town india

Emerging Rural & Small Town India

1

Pradeep KashyapFounder & CEO, MART

Presentation to CEO forum September, 2013

1 Million +

< 1 Million

< 10,000

48 large cities

7,834 towns

640,000Village

50%

25%

25%

GDP share

12 %

18%

70 %

Population

Where Does India Live

Source : Census of India 2011,, India Urbanization Econometric Model -McKinsey Global Institute ,MART Knowledge centre 2

Growing Rural Demand

Source: NSSOPercentage increase in monthly per capita expenditure

Per capita rural GDP grew at 6.2% CAGR against 4.7% in urban since 2000

3

Rural Growth Drivers

•Government Initiatives

oNREGA

oBharat Nirman

oImproved Infrastructure (all 500+ population villages

connected by road)

•Transformation in Agriculture

•Rural becoming a non farm economy

•Emergence of services sector

•Emergence of small towns

4

Agri Transformation in Last Decade

•50 mn tonnes increase in food grains production

from 196 to 245 mn tonnes

•Eight good monsoons

•More than two fold increase in support price of food grains

5

Emergence of Service Sector

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0

Mar-00 Mar-03 Mar-06 Mar-09 Mar-12

Service (40%)

Industry (30%)

Agriculture (30%)

Source: Government of India

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0

6

Retail trade39%

Manufacturing26%

Community, social and personal service

Education

Hotels and resturants

Transport and storage

Health and social work

other12%

Non-agriculture Establishments in Rural India

Source: NSSO 7

2%

4%

4%

5%

8%

Manufacturing shifting to Rural

•Out of 36 million non-agri enterprises in India,

20 million in rural (55%)

•75% of new factories in last decade in rural

•70% of all new manufacturing jobs created in rural

8

Rural Employment in millions

Source: NSSO and CRISIL Estimates

Agriculture, hunting & forestry &

fishing

Industry Manufacturing Construction Services

1990-00 218.3 32.6 21.2 9.4 35.5

2004-05 249.4 47 27.8 16.8 46.7

2009-10 229.0 58.6 24.2 31.7 49.5

9

Small Towns

Cities & Towns

No. Pop Strata (in Million)

% Share of HH

Income/HH in INR

% Share of Total Disposable Income

Tier I 8 > 4 29 1,86,000 39

Tier II 40 1 - 4 15 1,36,000 14

Tier III 53 0.5 - 1 9 1,29,000 9

Tier IV 7781 < 0.5 47 1,14,000 39

Total 7882 100 100

…NOT SO SMALL

10

Now

Rudrapur

Then..

11

Rudrapur

Radisson Blu

SIDCUL(Rudrapur outer/Pantnagar, on NH 87)

….Now

Budget Hotel- Hotel Ginger, a Tata enterprise in Sidcul

OMAXE & METROPOLIS CITY (Back side of Radisson)

12

Migration to metros slowing down

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Delhi Mumbai Kolkata Chennai Bangalore Hyderabad

1981-1991

1991-2001

2001-2011

Source: Census Bureau of India

Growth in Urban population,2001 to 2011

13

Rural Economy

One Trillion14

Rural Economy

or

15

150

500

250

900 million

2020

50

350

400

> 5

1-5

< 1

800 million

2010Per capita Income – USD/Day

Pyramid Morphing to Diamond

16

Share of Household Spending

rural catching up fast45

5

119

75

55

5

106 7

5

Food Health Transport & leisure travel

Education Clothing Durables

Urban Rural

Source: Max NCAER Survey, 2007 17

Changing

Consumer Behavior

18

Shift from

Loose to Packaged

loose

Packaged

19

Multi Brands within family

& by Individual

20

Shift from

Affordability to Economy

21

Regional Players gaining ground

22

Aspiration matching Urban

23

Buy Value for Money

24

English Medium Private School

25

Private Tuitions

26

Ready Stitched No Tailoring

27

Challenges of Reach, Acquire & Retain

Go to Market

28

• Problemo Dispersed geography, o Poor infrastructure - Leading to high logistics

costs

Reach

• Solutiono Identify high potential states ,towns

and villageso Urban clusters (NCR + other metros)o Large towns as hubs for villageso Innovative ‘last mile’ reacho Feet on street

29

Tale of 3 Rural India’s

Developed

Goa, Gujarat, Haryana , Maharashtra, Punjab, Delhi

Developing

Arunachal Pradesh, Himachal Pradesh, West Bengal, Tamil Nadu, Karnataka

Under Developed

Bihar, Madhya Pradesh, Uttar Pradesh, Odisha, Rajasthan, Chhattisgarh, Jharkhand, NE States

30

TV Ownership

%

4 wheeler ownership

%

GDP Share %

Population%

PopulationMm

Developed50 4 30 20 170Goa, Gujarat, Haryana , Maharashtra,

Punjab, Delhi

Developing25 1.5 34 30 240Arunachal Pradesh, Himachal Pradesh,

West Bengal, Tamil Nadu, Karnataka

Under Developed

12 0.9 36 50 400Bihar, Madhya Pradesh, Uttar Pradesh, Odisha, Rajasthan, Chhattisgarh, Jharkhand, NE States

Tale of 3 Rural India’s-Potential

31

Cities & Towns 2011

Source: NSSO

PopulationCities/Towns

(2011)

4 mn and Above 9

1-4 mn 44

0.5-1 mn 53

0.1-0.5 mn 507

50-100 k 612

20-50 k 1726

10-20 k 1436

5-10 k 1057

< 5 k 2491

Total 7935

32

Population No of villages % of total villages

Less than 200 96,855 15.7

200-500 1,36,454 21.4

501-1000 1,56,737 24.6

1001-2000 1,40,751 22.0

2001-5000 87,206 13.7

5001-10000 20,363 3.2

Total no of villages 6,38,365 100.0

Hardly any shops in these 230,000

villages

17% of villages account for 50% of rural population & 60% rural wealth

Distribution of Villages

33

• Solutiono Segment market on social, cultural, economic factors

o Engage with wide set of stakeholders

o ‘Word of mouth’ critical in acquiring consumers, so identify appropriate influencers

Acquisition

• Problemo Same value proposition as for urban

o Treating rural consumers as a homogeneous mass

o Skills of sales force to operate in complex, closely knit communities, collective decision making

o Seasonality, credit

34

• Problemo Building trust

o After sales service

Customer Retention

• Solutiono Building trust

Focus on satisfying customer needs and not on sales

Offer products suitable for local conditions and preferences

o Device low cost model of after sales support Customer feedback on products & sales process

Market intelligence on competitors

Strengthen bonds with consumers/community

o Invest in community development Create jobs

Build social infrastructure

Provide business opportunities 35

36

ThanksPradeep Kashyap

098109-48397

pradeep.kashyap@martrural.com

www.martrural.com

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