Tata group explores avenues to do business in rural markets
Mumbai: Tata group, the $100-billion salt-to-steel conglomerate, is exploring avenues to increase revenue from rural India at a time when the countrys economy is slowing and urban markets have saturated.
In 2009-10, there were 169 million rural households in the country with a total income of $572 billion. The number is forecast to rise to 178 million rural households with a total income of $1.07 trillion by 2015-16, Siddharta Roy, economic adviser at Tata group, said in a presentation at a round table discussion in Mumbai on rural aspirers.
By the year 2020-21, the rural income at $1.8 trillion would be larger than the size of the current Indian economy, he said.
The high growth potential of this sector has various group companiesTata Chemicals Ltd that sells salt, fertilizers and low-cost water purifying filter Tata Swach; Titan Industries Ltd that runs a rural jewellery retail chain Titan Gold Plus; Tata Teleservices Ltd with Tata Docomo; and Tata Motors Ltd that sells cars and commercial vehiclesexploring ways to tap this market.
Tata Motors launched a rural programme, Neev, two years ago and tied up with Indian Oil Corp. Ltd for distribution. It is also exploring tie-ups with the Indian post office and public sector banks for financing and distribution.
We have sold 13,000 vehicles in rural India in the past two years and expect to reach sales of 70,000 units by 2015-16, which will add an additional half a billion dollars to our turnover, said Sandeep Kumar, head of sales and marketing, small light and commercial vehicles, at Tata Motors.
Tata Teleservices has tied-up with Hindustan Unilever Ltds Shakti Enterprenuer, which covers 140,000 villages for the distribution of Tata Docomo calling cards in the villages. The firm gets 28% of its revenue from rural markets and expects this to grow by 1-2% every year.
Titans Gold Plus, launched in 2005, expects a revenue of about Rs.2,000 crore by 2015-16, from around Rs.800 crore now.
According to Roy, firms need to take good-quality products to the villages at reasonable prices, find ways to allow consumers to buy on credit, and innovate with package sizes. All this will lead to value-vaulting as people will buy a superior trajectory of brands and goods.
You can no longer afford to ignore the rural markets, said S.P. Tulsian, a Mumbai-based independent stock market analyst. Growth in the urban market has saturated and its rising rural incomes that is driving the growth.
Companies will also have to find new ways to market their products as creating awareness through mass media alone is unlikely to work.
Word-of-mouth of other farmers and retailers has far more influence in rural India than advertisements, said Mona Rai, head, marketing services, Tata Chemicals, which has a programme that identifies five-six farmers in every village as likely influencers and imparts training to them on the firms products.