AvantGarde

India is a fascinating country. Here we can find people living on roads  beside posh malls. ‘Rich getting richer and poor getting poorer’ is highly applicable to India. It is one of the developing powers of the world, but still it is unknown to a major extent.  Not many know the number of castes or languages spoken in the country, leave alone people and their lifestyle. The definition of rich and poor has various meanings in various parts of the country. For that matter even the government is not sure about the definition of poverty or below poverty. Government tries to adopt a definition so that the number of poor reported is deflated so that the spending on improving them can be reduced. India is supposedly an agricultural country with majority of population following agriculture; and its GDP is growing around 8-9% for the past decade but the growth in agriculture sector is negative. The third biggest Asian economy occupies one of the top positions in growth but one of the last positions in the human development index. Obesity and diabetes are becoming common in some parts but malnutrition and child mortality rate are prevailing for decades. There are 9.5 lakh pan shops, 638,667 number of villages, 612 districts, and 28 states in India. This is the country where you see a pan shop and Haagen Daz together, and a bullock cart and a Mercedes in the traffic jams. Indian market is very challenging and it really fascinates me as a marketer. A very large part of Indian population still lives in villages defining the Rural India. Government and companies don’t have any real understanding about markets in India (read rural India). But that does not mean that there is no trading or buying and selling happening. There are markets called ‘mandis’ which are exists for centuries. This paper tries to explain the challenges and potentials in marketing to Bharath (read as rural India)

Agriculture in India has a long history which dates back to ten thousand years. Today, India ranks second worldwide in farm output. Agriculture and allied sectors like forestry and logging accounted for 16.6% of the GDP in 2007, employed 52% of the total workforce and despite a steady decline of its share in the GDP, is still the largest economic sector and plays a significant role in the overall socio-economic development of India. But still most of the agricultural is not organised. Many big organisations like ITC (E-chaupal), DCSL Shriram (Hariyali Kisan Bazaar), Tata(Tata Kisaan Kendra/Sansar), Hindustan Uniliver Limited(Shakti), Godrej(Aadhar) and Reliance (Rural Business Hubs) are trying to capture these agricultural markets because of the huge potential available in these markets. The business model of most these companies are almost same. They promise to bring all of farmer needs under one roof and procure the farmer produce at assured rates without any middle man so that farmer gets assured returns. The ostensible promises made by these companies are to improve the agricultural productivity and to improve the life standards of farmers by making the agricultural trading more organised and reducing the transaction costs. But their real objective is to sell their produce. If we keenly observe, all these companies are manufacturers of fertilisers or FMCG products which they want to sell through these rural bazaars. The reality is many of these initiatives have failed; the reasons for which are quite interesting.

We will take the case of the Hariyali Kisan Bazaar (HKB) by DCSL Shriram for understanding this better. We will compare HKB (located in Kanpur) and a mandi in Kanpur (a second tier city with dense population comprising mostly agriculture labours). The first important factor that has to be observed in this case is the location. The mandi is located in a place which is very near to all the people who use it. It can be debated whether the mandi is located near them or they are located near the mandi because nobody knows when the mandi was established. But HKB, it is located in a place which is far away from most of the villages surrounding it. When we observed the HKB outlet and the mandi, we have not seen even a single customer in the HKB but almost all the shops in the mandi had customers. There are many reasons other than location for such poor show by HKB. In HKB, there will be only one vendor for a product, but in case of mandis, there will be many shopkeepers selling same product at various qualities and various prices which give customers many options to choose from. The products sold in HKB are of good quality but of high prices.

Take baskets for example, HKBs sell plastic baskets made of plastic which are good in quality and reasonable price, whereas the mandis sell baskets made of natural fibre material and demand an affordable price from farmers. Apart from being cheaper, the baskets sold in the mandis are bio-degradable and composed of natural materials, answering sustainability. Another product which makes the reasoning so easy is Sweets. HKBs sell branded and packed sweets like Haldiram which costs anywhere from Rs 300 to Rs 600. On the other hand, in mandis sweets are locally made and sold at the same place. HKB sweets are sold at standard packages but in mandis, sweets can be bought in any quantity. It can be argued that the branded sweets are of good quality and sweets sold at mandis are made in un-hygienic conditions, but given the financial condition of the farmers, they will always prefer to go for cheaper products than quality products.

There are many other reasons for farmers preferring local mandis instead of HKBs. In local mandis, the shopkeepers are specialists in their products and they have relations with the customers for years and they being local people, they know everything about their market which the people in HKB will lack.

One more area in which these big corporations underperform is in understanding the diversity in India. Human nature is to think that all which are unknown is same. Since all the big companies don’t have a thorough understanding about the diversity of India, they think that India as a homogeneous market. But India is a place where we can find difference in culture or way of living every 100 KM.

As a whole, agriculture which contributes to around 1/5^th of GDP (this number might be low because of the deficiencies in the calculation of GDP) and employs about a half of the workforce is not completely tapped. Most of the production and trading of the agricultural goods are still unorganised and untapped. Apart from this, most of the products that the farmers related labour buy are also from unorganised sectors. So there is a lot of opportunity for the large organisations to enter into these markets. But, the products which are marketed in urban India cannot be marketed in rural India mainly because of difference in income levels, lack of awareness about the new technology and the conservative approach that is still followed. A pan India strategy won’t work for rural marketing because the buying behaviour of people in metros, tier I and tier II cities are almost same across the country because of globalisation, increase in literacy rates and various other factors. But rural buying pattern is not same across India. So companies must do a thorough study about these variations and try to tap these markets.

Low agricultural productivity is one part of the story. There is another part, which is wastage of agricultural produce because of improper storage facilities. In 2010 Indian government has let food grains – enough to feed 140 million poor people for a month – to rot. This wastage is only an example; millions of tonnes of food grains go as waste unreported because of the improper storage facilities. Again the government is spending lot of money in procuring the food grains, but everything goes waste because of the inefficient technology and non-existent supply chain management. Even after so much technological development the storage facilities available for storing the agricultural produce is very poor. The private sector companies can enter in this vacuum and use technology and strategies like supply chain management for capturing these fields. For companies to succeed in the agriculture sector in India, they must rope in local talent to develop strategies for executing the plans in regional level.

Now a standard question arises, ‘how is all this related to marketing?’. Marketing is basically selling hope. The educated people in marketing should not be pessimistic thinking that these changes cannot be made by individuals; because anything can be done by selling hope. Gandhiji was able to sell his ideas because of the hope that he was able to create among people. Instead of increasing the revenues and profits for large organisations which are already generating huge profits for wealthy people, youngsters should use their knowledge and wisdom for making a transformation in the society they live. Organisations with huge resources can also try to increase their revenues and the same time make a social transformation. In this way marketing can bring a social transformation and it will help in inclusive growth of the country.

Arun Karthik B.

MBA batch of 2012

IIT Kanpur