Sonu Report

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A

PROJECT REPORT

ON

RURAL MARKETING IN ITC:

OPPORTUNITIES AND CHALLENGES

Submitted in the partial fulfillment of the requirement for

the award of degree of

MASTERS OF BUSINESS ADMINISTRATION

SESSION (2011-2013)

SUBMITTED TO : - SUBMITTED BY:-KURUKSHETRA UNIVERSITY , Sonu Kumar

KURUKSHETRA MBA Final (Marketing)

Univ. Roll No.: _______

SETH JAI PARKASH MUKAND LAL INSTITUTE OF ENGINEERING &

TECHNOLOGY (JMIT) CHHOTA BAANS, RADAUR,YNR, HARYANA

(Approved by AICTE, Affiliated to Kurukshetra University, Kurukshetra)

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CERTIFICATE

Dated

It is to certify that Mr. Sonu kumar bearing Roll No. : 2011035 & Univ. Roll No.:

_____________ bonafied students of Seth Jai Parkash Mukand Lal Institute of

Engineering & Technology (JMIT, RADAUR), during session 2011-13 has completed

their research entitled Rural Marketing in ITC: Opportunities and challenges

which is compulsory part of the syllabus.

I wish him all the success for their future endeavor.

MRS. SUNITA

AP ( MBA)

JMIT, RADAUR

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DECLARATION

I, Sonu kumar student of MBA-final, studying at SETH JAI PARKASH MUKAND LAL

INSTITUTE OF ENGINEERING & TECHNOLOGY (JMIT) CHHOTA BAANS,

RADAUR, YNR, hereby declare that the project report on Rural Marketing in

ITC : Opportunities and challenges submitted to KURUKSHETRA

UNIVERSITY, KURUKSHETRA in partial fulfillment of Degree of Masters of

Business Administration is the original work conducted by me.

The information and data given in the report is authentic to the best of my knowledge.

This Project report is not being submitted to any other University for award of any other

Degree, Diploma and Fellowship.

(SONU KUMAR)

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ACKNOWLEDGEMENT

My sincere thanks are due to all the contributors without whose efforts this project would

not have been completed. No task of this nature is a single person effort, so I am very

thankful to Dr. J.P. Banerji (JMIT, RADAUR) for providing me the opportunity for

doing the research work .

I successfully completed my research work. Their unfailing interest and support gave a

new dimension to my work. They made it possible to collect abundance of material, the

relevant portion of which is quoted in this project

I am also very grateful to especially Mrs.Sunita (A.P, MBA) whose teaching

methodology helped me in completion of my project without any difficulty.

This is the effort done by me which brings the result of this research report completion

entitled on Rural Marketing in ITC: Opportunities and challenges So, I am verythankful to all of the faculty members for the proper and timely guidance.

SONU KUMAR

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PREFACE

The main objective of the project is familiarization with the necessary theoretical inputs

and to gain sufficient practical exposure to establish a distant linkage between the

conceptual knowledge acquired at the institute and practices those concepts .

The Project is concerned with the Rural Marketing in ITC: Opportunities and

challenges During my tenure of research , I studied the various development tools and

deeply analyzed the functions.

Prior to making reference to working of the project prepared, the analysis and feasibility

and all other aspect were taken into consideration.

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TABLE OF CONTENTS

DESCRIPTION OF CONTENTS PAGE NO.

Certificate i

Declaration ii

Acknowledgement ii

Preface iv

INTRODUCTION OF 1-

Rural Marketing

And ITC

OBJECTIVES OF STUDY

LITERATURE REVIEW

RESEARCH METHODOLOGY

MEANING

TYPES OF RESEARCH

RESEARCH DESIGN

SAMPLING DESIGN

DATA COLLECTION SOURCES

AREA & SCOPE OF THE STUDY

DATA ANALYSIS AND INTERPRETATIONS

FINDINGS

LIMITATIONS OF THE STUDY

SUGGESTIONS

CONCLUSION

BIBLIOGRAPHY

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ANNEXURE

INTRODUCTION

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Introduction

To promote brands in rural markets requires the special dealings. Due to the social and

backward condition the personal selling efforts become a challenging role to play. The

word of mouth is an important message carrier in rural areas. Infect the opinion leaders

are the most influencing part of promotion strategy of rural promotion efforts. The

experience of agricultural input industry can act as a guideline for the marketing efforts

of consumer durable and non-durable companies. Relevance of Mass Media is also a very

important factor.

The Indian established Industries have the advantages, which MNC don't enjoy in this

regard. The strong Indian brands have strong brand equity, consumer demand-pull and

efficient and dedicated dealer network which have been created over a period of time.

The rural market has a grip of strong country shops, which affect the sale of various

products in rural market. The companies are trying to trigger growth in rural areas. They

are identifying the fact that rural people are now in the better position with disposable

income. The low rate finance availability has also increased the affordability of

purchasing the costly products by the rural people. Marketer should understand the price

sensitivity of a consumer in a rural area. This paper is therefore an attempt to understand

opportunities, challenges and strategies in the rural market.

Indian Marketers on rural marketing have two understanding

(i) The urban metro products and marketing products can be implemented in rural

markets with some or no change.

(ii) The rural marketing required the separate skills and techniques from its urban

counterpart. The Marketers have many facilities to make them believe in accepting the

truth that rural markets are different in so many terms.

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Realities before the Marketers

70% of the Indian population lives in rural areas. This segment, commonly referred to as

the 'bottom of the pyramid', presents a huge opportunity for companies. In recent years,

rural markets have acquired significance, as the overall growth of the economy has

resulted into substantial increase in the purchasing power of the rural communities.

On account of green revolution, the rural areas are consuming a large quantity of

industrial and urban manufactured products. In this context, a special marketing strategy,

namely, rural marketing, has emerged. But often, rural marketing is confused with

agricultural marketing Agricultural marketing denotes marketing of goods and services

of the rural areas to the urban consumers or industrial consumers, whereas rural

marketing involves delivering manufactured or processed goods or services to rural

producers or consumers.

Concept

"The future lies with those companies who see the poor as their customers."

In recent years, rural markets have acquired significance, as the overall growth of the

economy has resulted into substantial increase in the purchasing power of the rural

communities.

On account of green revolution, the rural areas are consuming a large quantity of

industrial and urban manufactured products. In this context, a special marketing strategy,namely, rural marketing, has emerged. But often, rural marketing is confused with

agricultural marketing - the latter denotes marketing of produce of the rural areas to the

urban consumers or industrial consumers, whereas rural marketing involves delivering

manufactured or processed inputs or services to rural producers or consumers.

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What Makes Rural Markets Attractive?

Rural market has following attributes and the following facts substantiate this: -

742 million people

Estimated annual size of the rural market

FMCG Rs. 65,000 Crore

Durables Rs. 5,000 Crore

Agri-Inputs(including tractors) Rs. 45,000 Crore

2 /4 Wheelers Rs. 8,000 Crore

Source: NCAER(National Council of Applied Economic Research)

In 2011-12, LIC sold 55% of its policies in rural India.

Of two million BSNL mobile connections, 50% are in small towns / villages.

Of the 6.0 lakh villages, 5.22 lakh have a Village Public Telephone (VPT).

41 million Kisan Credit Cards have been issued (against 22 million credit-plus-

debit cards in urban), with cumulative credit of Rs. 977 billion resulting in

tremendous liquidity.

Of the 20 million Rediffmail sign-ups, 60% are from small towns. 50% of

transactions from these towns are on Rediff online shopping site.

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42 million rural households (HHs) are availing banking services in comparison

to 27 million urban HHs.

Investment in formal savings instruments is 6.6 million HHs in rural and 6.7

million HHs in urban.

Opportunities

Infrastructure is improving rapidly -

In 50 years only, 40% villages have been connected by road, in next 10 years

another 30% would be connected.

More than 90% villages are electrified, though only 44% rural homes have

electric connections.

Rural telephone density has gone up by 300% in the last 10 years; every 1000+

pop is connected by STD.

Social indicators have improved a lot between 1981 and 2012 -

Number of "pucca" houses doubled from 22% to 41% and "kuccha" houses

halved (41% to 23%).

Percentage of BPL families declined from 46% to 27%.

Rural literacy level improved from 36% to 59%.

Low penetration rates in rural areas, so there are many marketing opportunities

Proliferation of large format Rural Retail Stores, which have been successful

also.

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Rural Consumer Insights

Rural India buys -

Products more often (mostly weekly).

Buys small packs, low unit price more important than economy.

In rural India, brands rarely fight with each other; they just have to be present at

the right place.

Many brands are building strong rural base without much advertising support.

Chik shampoo, second largest shampoo brand.

Ghadi detergent, third largest brand.

Fewer brand choices in rural areas; number of FMCG brand in rural is half that of

urban.

Buy value for money, not cheap products.

Some Myths

Myth 1: Rural Market is a Homogeneous Mass

Reality: It's a heterogeneous population. Various Tiers are present depending on the

incomes like Big Landlords; Traders; Small Farmers; Marginal Farmers: Labourers;

Artisans. State wise variations in rural demographics are present viz. literacy (Kerala

90%, Bihar 44%) and population below poverty line (Orissa 48%, Punjab 6%).

Myth 2: Disposable Income is Low

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Reality: Number of middle class HHs (annual income Rs. 45,000 - 2,15,000) for rural

sector is 27.4 million as compared to the figure of 29.5 million for urban sector. Rural

incomes CAGR was 10.95% compared to 10.74% in urban between 1970-71 and 1993-

94.

Myth 3: Individuals Decide About Purchases

Reality: Decision making process is collective. Purchase process - influencer, decider,

buyer, one who pays - can all be different. So marketers must address brand message at

several levels. Rural youth brings brand knowledge to Households (HH).

Why Different Strategies?

Rural markets, as part of any economy, have untapped potential. There are several

difficulties confronting the effort to fully explore rural markets. The concept of rural

markets in India is still in evolving shape, and the sector poses a variety of challenges.

Distribution costs and non-availability of retail outlets are major problems faced by the

marketers. The success of a brand in the Indian rural market is as unpredictable as rain.

Many brands, which should have been successful, have failed miserably. This is because

most firms try to extend marketing plans that they use in urban areas to the rural markets.

The unique consumption patterns, tastes, and needs of the rural consumers should be

analyzed at the product planning stage so that they match the needs of the rural people.

Therefore, marketers need to understand the social dynamics and attitude variations

within each village though nationally it follows a consistent pattern. The main problems

in rural marketing are: -

Understanding the Rural Consumer

Poor Infrastructure

Physical Distribution

Channel Management

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Promotion and Marketing Communication

Dynamics of rural markets differ from other market types, and similarly, rural marketing

strategies are also significantly different from the marketing strategies aimed at an urban

or industrial consumer.

Strategies to be Followed

Marketing Strategy

Marketers need to understand the psyche of the rural consumers and then act accordingly.

Rural marketing involves more intensive personal selling efforts compared to urban

marketing. Firms should refrain from designing goods for the urban markets and

subsequently pushing them in the rural areas. To effectively tap the rural market, a brand

must associate it with the same things the rural folks do. This can be done by utilizing the

various rural folk media to reach them in their own language and in large numbers so that

the brand can be associated with the myriad rituals, celebrations, festivals, "melas", and

other activities where they assemble.

Distribution Strategy

One of the ways could be using company delivery van which can serve two purposes - it

can take the products to the customers in every nook and corner of the market, and it also

enables the firm to establish direct contact with them, and thereby facilitate sales

promotion.

However, only the bigwigs can adopt this channel. The companies with relatively fewer

resources can go in for syndicated distribution where a tie-up between non-competitive

marketers can be established to facilitate distribution. Annual "melas" organized are quite

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popular and provide a very good platform for distribution because people visit them to

make several purchases.

According to the Indian Market Research Bureau, around 8000 such melas are held in

rural India every year. Rural markets have the practice of fixing specific days in a week

as Market Days (often called "Haats') when exchange of goods and services are carried

out. This is another potential low cost distribution channel available to the marketers.

Also, every region consisting of several villages is generally served by one satellite town

(termed as "Mandis" or Agri-markets) where people prefer to go to buy their durable

commodities. If marketing managers use these feeder towns, they will easily be able to

cover a large section of the rural population.

Promotional Strategy

Firms must be very careful in choosing the vehicle to be used for communication. Only

16% of the rural population has access to a vernacular newspaper. So, the audio visuals

must be planned to convey a right message to the rural folk. The rich, traditional media

forms like folk dances, puppet shows, etc., with which the rural consumers are familiar

and comfortable, can be used for high impact product campaigns.

Some Live Examples

One very fine example can be quoted of Escorts where they focused on deeper

penetration. They did not rely on TV or press advertisements, but rather

concentrated on focused approach depending on geographical and market

parameters like fares, melas, etc. Looking at the 'kuchha' roads of village, they

positioned their bike as tough vehicle. Their advertisements showed

Dharmendra riding Escort with the punch line 'Jandar Sawari, Shandar Sawari'.

Thus, they achieved whopping sales of 95000 vehicles annually.

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HLL started 'Operation Bharat' to tap the rural markets. Under this operation, it

passed out low-priced sample packets of its toothpaste, fairness cream, Clinic

plus shampoo, and Ponds cream to twenty million households.

ITC is setting up e-Choupals, which offers the farmers all the information,

products and services they need to enhance farm productivity, improve farm-

gate price realization and cut transaction costs. Farmers can access latest local

and global information on weather, scientific farming practices as well as market

prices at the village itself through this web portal - all in Hindi. It also facilitates

supply of high quality farm inputs as well as purchase of commodities at their

doorstep.

BPCL introduced Rural Marketing Vehicle (RMV) as their strategy for rural

marketing. It moves from village to village and fills cylinders on the spot for the

rural customers. BPCL considered low-income of rural population, and therefore

introduced a smaller size cylinder to reduce both the initial deposit cost as well

as the recurring refill cost.

CONTRIBUTION OF RURAL MARKETING IN INDIAN ECONOMY

The concept ofRural Marketing in India Economy has always played an influential

role in the lives of people. In India, leaving out a few metropolitan cities, all the districts

and industrial townships are connected with rural markets.

The rural market in India is not a separate entity in itself and it is highly influenced by the

sociological and behavioral factors operating in the country. The rural population in India

accounts for around 627 million, which is exactly 74.3 percent of the total population.

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The rural market in India brings in bigger revenues in the country, as the rural regions

comprise of the maximum consumers in this country. The rural market in Indian

economy generates almost more than half of the country's income. Rural marketing in

Indian economy can be classified under two broad categories. These are:

The market for consumer goods that comprise of both durable and non-durable

goods

The market for agricultural inputs that include fertilizers, pesticides, seeds, and so

on

The concept of rural marketing in India is often been found to form ambiguity in the

minds of people who think rural marketing is all about agricultural marketing. However,rural marketing determines the carrying out of business activities bringing in the flow of

goods from urban sectors to the rural regions of the country as well as the marketing of

various products manufactured by the non-agricultural workers from rural to urban areas.

To be precise, Rural Marketing in India Economy covers two broad sections, namely:

Selling of agricultural items in the urban areas

Selling of manufactured products in the rural regions

Some of the important features or characteristics of Rural Marketing in India Economy

are being listed below:

With the initiation of various rural development programmes there have been an

upsurge of employment opportunities for the rural poor. One of the biggest cause

behind the steady growth of rural market is that it is not exploited and also yet to

be explored.

The rural market in India is vast and scattered and offers a plethora of

opportunities in comparison to the urban sector. It covers the maximumpopulation and regions and thereby, the maximum number of consumers.

The social status of the rural regions is precarious as the income level and literacy

is extremely low along with the range of traditional values and superstitious

beliefs that have always been a major impediment in the progression of this

sector.

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The steps taken by the Government of India to initiate proper irrigation,

infrastructural developments, prevention of flood, grants for fertilizers, and

various schemes to cut down the poverty line have improved the condition of the

rural masses.

RURAL MARKETING - CHALLENGES

Prime Minister Manmohan Singh recently talked about his vision for rural India: "My

vision of rural India is of a modern agrarian, industrial and services economy co-existing

side by side, where people can live in well-equipped villages and commute easily to

work, be it on the farm or in the non-farm economy. There is much that modern science

and technology can do to realise this vision. Rural incomes have to be increased. Rural

infrastructure has to be improved. Rural health and education needs have to be met.

Employment opportunities have to be created in rural areas."

'Go rural' is the slogan of marketing gurus after analyzing the socio-economic changes in

villages. The Rural population is nearly three times the urban, so that Rural consumers

have become the prime target market for consumer durable and non-durable products,

food, construction, electrical, electronics, automobiles, banks, insurance companies and

other sectors besides hundred per cent of agri-input products such as seeds, fertilizers,pesticides and farm machinery. The Indian rural market today accounts for only about Rs

8 billion of the total ad pie of Rs 120 billion, thus claiming 6.6 per cent of the total share.

So clearly there seems to be a long way ahead. Although a lot is spoken about the

immense potential of the unexplored rural market, advertisers and companies find it

easier to vie for a share of the already divided urban pie.

The success of a brand in the Indian rural market is as unpredictable as rain. It has always

been difficult to gauge the rural market. Many brands, which should have been

successful, have failed miserably. More often than not, people attribute rural market

success to luck. Therefore, marketers need to understand the social dynamics and attitude

variations within each village though nationally it follows a consistent pattern looking at

the challenges and the opportunities which rural markets offer to the marketers it can be

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said that the future is very promising for those who can understand the dynamics of rural

markets and exploit them to their best advantage. A radical change in attitudes of

marketers towards the vibrant and burgeoning rural markets is called for, so they can

successfully impress on the 230 million rural consumers spread over approximately six

hundred thousand villages in rural India.

What rural market buys?

Rural India buys small packs, as they are perceived as value for money. There is brand

stickiness, where a consumer buys a brand out of habit and not really by choice. Brands

rarely fight for market share; they just have to be visible in the right place. Even

expensive brands, such as Close-Up, Marie biscuits and Clinic shampoo are doing well

because of deep distribution, many brands are doing well without much advertising

support Ghadi, a big detergent brand in North India, is an example.

Why Rural Market?

The Indian rural market has a huge demand base and offers great opportunities to

marketers. Two-thirds of Indian consumers live in rural areas and almost half of the

national income is generated here. The reasons for heading into the rural areas are fairlyclear. The urban consumer durable market for products like colour TVs, washing

machines, refrigerators and air conditioners is growing annually at between 7 per cent

and 10 per cent.

The rural market is zooming ahead at around 25 per cent annually. "The rural market is

growing faster than urban India now," says Venugopal Dhoot, chairman of the Rs 989

-crore(Rs billion) Videocon Appliances. "The urban market is a replacement and up

gradation market today," adds Samsung's director, marketing, Ravinder Zutshi.

Reasons for improvement of business in rural area

Socio-economic changes (lifestyle, habits and tastes, economic status)

Literacy level (25% before independence more than 65% in 2001)

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Infrastructure facilities (roads, electricity, media)

Increase in income

Increase in expectations

MART, the specialist rural marketing and rural development consultancy has found that

53 per cent of FMCG sales lie in the rural areas, as do 59 per cent of consumer durable

sales, said its head Pradeep Kashyap at the seminar. Of two million BSNL mobile

connections, 50 per cent went to small towns and villages, of 20 million Rediffmail

subscriptions, 60 per cent came from small towns, so did half the transactions on Rediff's

shopping site.

Special features of rural market

Unlike urban markets, rural markets are difficult to predict and possess special

characteristics. The featured population is predominantly illiterate, have low income,

characterized by irregular income, lack of monthly income and flow of income

fluctuating with the monsoon winds.

Rural markets face the critical issues of Distribution, Understanding the rural consumer,

Communication and Poor infrastructure. The marketer has to strengthen the distribution

and pricing strategies. The rural consumer expects value for money and owing to has

unsteady and meager status of weekly income; increasing the household income and

improving distribution are the viable strategies that have to be adapted to tap the immense

potential of the market.

Media reach is a strong reason for the penetration of goods like cosmetics, mobile

phones, etc., which are only used by the urban people. Increasing awareness and

knowledge on different products and brands accelerate the demand. The rural audience

are however critical of glamorous ads on TV, and depend on the opinion leaders who

introduce the product by using it and recommending it.

Opinion leaders play a key role in popularizing products and influence in rural market.

Nowadays educated youth of rural also influences the rural consumers. Rural consumers

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are influenced by the life style they watch on television sets. Their less exposure to

outside world makes them innocent and fascinated to novelties. The reach of mass

television media, especially television has influenced the buying behaviour greatly

Creating brands for rural India

Rural markets are delicately powerful. Certain adaptations are required to cater to the

rural masses; they have unique expectation and warrant changes in all four parameters of

product, price, promotion and distribution.

A lot is already emphasized on adapting the product and price in terms of packaging,

flavouring, etc and in sachets, priced to suit the economic status of the rural India in sizes

like Rs.5 packs and Re.1 packs that are perceived to be of value for money. This is a

typical penetration strategy, that promises to convert the first time customers to repeated

customers.

The promotion strategies and distribution strategies are of paramount importance. Ad

makers have learnt to leverage the benefits of improved infrastructure and media reach.

The television airs advertisements to lure rural masses, and they are sure it reaches the

target audience, because majority of rural India possesses and is glued to TV sets!

Distributing small and medium sized packets thro poor roads, over long distances, into

deep pockets of rural India and getting the stockiest to trust the mobility is a Herculean

task. Giving the confidence those advertisements will support. Sales force is being trained

to win the confidence of opinion leaders. Opinion leaders play an important role in

popularizing the brand. They sometimes play the role of entry barriers for new products.

The method of promotion needs to be tailored to suit the expectations of the market.

Techniques that have proved to be successful are Van campaigns, edutainment films,

generating word of mouth publicity through opinion leaders, colourful wall paintings.

The Wide reach of television has exposed the other wise conservative audience to

westernization. Panchayat televisions in Tamilnadu carries message that are well received

and contribute to community development.

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Dynamics of rural markets differ from other market types, and similarly rural marketing

strategies are also significantly different from the marketing strategies aimed at an urban

or industrial consumer. This, along with several other related issues, have been subject

matter of intense discussions and debate in countries like India and China and focus of

even international symposia organized in these countries.

Rural markets and rural marketing involve a number of strategies, which include:

* Client and location specific promotion

* Joint or cooperative promotion

* Bundling of inputs

* Partnership for sustainability

Client and Location specific promotion involves a strategy designed to be suitable to the

location and the client. Joint or co-operative promotion strategy involves participation

between the marketing agencies and the client. 'Bundling of inputs' denote a marketing

strategy, in which several related items are sold to the target client, including

arrangements of credit, after-sale service, and so on. Media, both traditional as well as themodern media, is used as a marketing strategy to attract rural customers.

Partnership for sustainability involves laying and building a foundation for continuous

and long lasting relationship.

Innovative media can be used to reach the rural customers. Radio and television are the

conventional media that are reaching the rural audience effectively. But horse cart,

bullock cart and wall writing are the other media, which can carry the message

effectively to the rural customers.

Rural marketing is an evolving concept, and as a part of any economy has untapped

potential; marketers have realized the opportunity recently. Improvement in infrastructure

and reach, promise a bright future for those intending to go rural. Rural consumers are

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keen on branded goods nowadays, so the market size for products and services seems to

have burgeoned. The rural population has shown a trend of wanting to move into a state

of gradual urbanization in terms of exposure, habits, lifestyles and lastly, consumption

patterns of goods and services. There are dangers on concentrating more on the rural

customers. Reducing the product features in order to lower prices is a dangerous game to

play.

RURAL MARKET - OPPORTUNITY

GONE ARE the days when a rural consumer went to a nearby city to buy``branded

products and services". Time was when only a select household consumed branded

goods, be it tea or jeans. There were days when big companies flocked to rural markets to

establish their brands. Today, rural markets are critical for every marketer - be it for a

branded shampoo or an automobile. Time was when marketers thought van campaigns,

cinema commercials and a few wall paintings would suffice to entice rural folks under

their folds. Thanks to television, today a customer in a rural area is quite literate about

myriad products that are on offer in the market place. An Indian farmer going through his

daily chores wearing jeans may sound idiotic. Not for Arvind Mills, though. When it

launched the Ruf & Tuf kits, it had created quite a sensation among the rural folks as well

within few months of their launch.

Trends indicate that the rural markets are coming up in a big way and growing twice as

fast as the urban, witnessing a rise in sales of hitherto typical urban kitchen gadgets such

as refrigerators, mixer-grinders and pressure cookers. According to a National Council

for Applied Economic Research (NCAER) study, there are as many 'middle income and

above' households in the rural areas as there are in the urban areas. There are almost

twice as many 'lower middle income' households in rural areas as in the urban areas. At

the highest income level there are 2.3 million urban households as against 1.6 million

households in rural areas. According to Mr. D. Shivakumar, Business Head (Hair),

Personal Products Division, Hindustan Lever Limited, the money available to spend on

FMCG (Fast Moving Consumer Goods) products by urban India is Rs. 49,500 crores as

against is Rs. 63,500 crores in rural India.

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As per NCAER projections, the number of middle and high income households in rural

India is expected to grow from 80 million to 111 million by 2007. In urban India, the

same is expected to grow from 46 million to 59 million. Thus, the absolute size of rural

India is expected to be double that of urban India. The study on ownership of goods

indicates the same trend. It segments durables under three groups - (1) necessary products

- Transistors, wristwatch and bicycle, (2) Emerging products - B&W TV and cassette

recorder, (3) Lifystyle products - CTV and refrigerators. Marketers have to depend on

rural India for the first two categories for growth and size. Even in lifestyle products,

rural India will be significant over next five years.

At a recent seminar in Chennai on 'rural marketing for competitive advantage in

globalised India', organised by Anugrah Madison Advertising Pvt Limited, marketingpundits have echoed that a sound network and a thorough understanding of the village

psyche are a SINE QUO NON for making inroads into rural markets. The price-

sensitivity of a consumer in a village is something the marketers should be alive to. Rural

income levels are largely determined by the vagaries of monsoon and, hence, the demand

there is not an easy horse to ride on. Apart from increasing the geographical width of

their product distribution, the focus of corporates should be on the introduction of brands

and develop strategies specific to rural consumers. Britannia Industries launched Tiger

Biscuits especially for the rural market. It clearly paid dividend. Its share of the glucose

biscuit market has increased from 7 per cent to 15 per cent.

Effective communication

An important tool to reach out to the rural audience is through effective communication.

A rural consumer is brand loyal and understands symbols better. This also makes it easy

to sell look - alike", says Mr. R.V Rajan, CMD, Anugrah Madison Advertising. The rural

audience has matured enough to understand the communication developed for the urban

markets, especially with reference to FMCG products. Television has been a major

effective communication system for rural mass and, as a result, companies should

identify themselves with their advertisements. Advertisements touching the emotions of

the rural folks, it is argued, could drive a quantum jump in sales.

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There is a need to differentiate the brand according to regional disparities. The

differentiation may not necessarily be in terms of product content. It may also be in terms

of packaging, communication or association with the brand.

The brand has to be made relevant by understanding local needs. Even offering the same

product in different regions with different brand names could be adopted as a strategy. At

times it is difficult to pass on an innovation over an existing product to the rural

consumer unlike his urban counterpart - like increased calcium or herbal content or a

germ-control formula in toothpaste.

According to Mr. Shivakumar, HLL, the four factors which influence demand in rural

India are - access, attitude, awareness and Affluence. HLL has successfully used this to

influence the rural market for its shampoos in sachets. The sachet strategy has proved so

successful that, according to an ORG - MARG data, 95 per cent of total shampoo sales in

rural India is by sachets. The company had developed a direct access to markets through

wholesale channel and created awareness through media, demonstration and on ground

contact. This changed the attitude of the villagers. Today, the young and the educated in

the villages are already large in number. And this number is increasing. Already, 40 per

cent of all those graduating from colleges are rural youth. They are the decision makers

and are not very different in education, exposure, attitudes and aspirations from their

counterparts at least in smaller cities and towns.

District marketing

Since marketing is to target the growing segments, Mr. Francis Xavier, Managing

Director, Francis Kanoi Marketing Research, wants to see the urban-like village dweller

as an urbanized person from the districts. The village then becomes a location or a suburb

of a district. And the district becomes the basic geographical entity. Since the urban-like

populations in the villages are taken as a part of the district, they will represent the

dominant part of the market in most of the districts. This will compel the kind of attention

that it deserves. A districts perspective removes the complexities, heterogeneity, access

and targetability that have hindered rural marketing initiatives. He feels that rural

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marketing requires every element of marketing including product, pricing, packaging,

advertising, and media planning to have the rural customer as the target. And, this

becomes possible when we have districts marketing as a separate entity.

IMPACT OF GLOBALISATION

The impact of globalisation will be felt in rural India as much as in urban. But it will be

slow. It will have its impact on target groups like farmers, youth and women. Farmers,

today 'keep in touch' with the latest information and maximise both ends. Animal feed

producers no longer look at Andhra Pradesh or Karnataka. They keep their cell phones

constantly connected to global markets. Surely, price movements and products'

availability in the international market place seem to drive their local business strategies.

On youth its impact is on knowledge and information and while on women it still

depends on the socio-economic aspect. The marketers who understand the rural consumer

and fine tune their strategy are sure to reap benefits in the coming years. In fact, the

leadership in any product or service is linked to leadership in the rural India except for

few lifestyle-based products, which depend on urban India mainly.

RURAL BRANDING IS DISTINCTLY DIFFERENT FROM URBAN

MARKETING

In rural India, the branding rules are distinctly different from urban markets. Not

only does the cultural landscape differ, the factors that influence purchasing

decisions differ too. Price and value for money are high on their list.

Rural branding calls for a greater component of local media and less of the mass

media. Since these markets have specialized forums of their own like like temple

festivals, melas, cinema halls, these can be leveraged to promote brands. Direct

Marketing and events like road shows, film shows, melas, street theatre can also be

used to promote brands.

Since the literacy rate is not so high, branding activities move more towards

symbols, visuals and audio and video campaigns.

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Source: India today Magzine

In a market where life has revolved around deep rooted community values, joint families,

and social customs and taboos (women, for example, are not allowed to wear trousers),

marketers realize that the traditional routes of market entry and brand building employed

in urban India are often not feasible. As Adi Godrej, Chairman of the Godrej Group, says,

The challenge [for brands] is to understand the [psyche] of the rural consumer, create

better distribution, and [appreciate] the heterogeneity.

In recent times, rural India has witnessed a wave of change. Dinesh Malhotra, general

manager of Linterland (rural arm of Lintas), points out, With media exposure and

increasing literacy levels, people in rural India are now demanding a better lifestyle. The

educated rural yuppie (males in the 15-34 age group) is moving out to work in nearby

towns and cities, and sending money home to his family. This has created an indirect

increase in disposable incomes and a surge in demand for consumer goods. The rural

youth are slowly evolving as opinion leaders in influencing brand and product

decisions in a market that was swayed by village elders for centuries.

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When building a brand in rural India, word-of-mouth is a huge motivator. Focused brand-

building initiativeslike participation at community events such as melas (village

fairs), haats (markets), street theater, van campaigns, and puppet showsgenerate

positive word-of-mouth and influence buying decisions.

Cholayil Ltd., a purveyor of the herbal soap Medimix, campaigned in mobile vans to

promote its brand. We run a van campaign which visits the interior villages where there

are no distributors. We halt the van at specific points [where village folks congregate and

watch videos shown on these vans] and give out product samples. However, contrary to

claims of Medimixs success, Malhotra believes that van campaigns can be very

expensive. [Alternatively, promoting ones brand] in large congregation points like

village markets and fairs has a far wider reach, and is more cost effective.

Direct media promotions have helped build knowledge of product categories and change

long-entrenched living habits. Colgate-Palmolive, a leading oral hygiene product

manufacturer, entered the rural market at a time when Neem twigs (the Neem tree has

herbal properties) and non-dentifrice products like ash, charcoal, or salt were the norm

for brushing teeth (in fact in some rural pockets, this tradition still continues). In 2001,

Colgate-Palmolive launched Operation Jagruti to educate villagers about oral hygiene

and its benefits vis--vis traditional products like Neem. Through product trials and

free samples, the company was able to generate awareness in this new market. On a

similar note, CK Ranganathan, managing director of Cavin Kare, notes, When we

entered the rural areas in South India, people used to wash their hair with soap. When we

launched the Chik brand of shampoo we educated the people on how to use it through

live touch and feel demonstrations and also distributed free sachets at fairs. This

strategy worked wonders in the rural areas of Tamil Nadu and Andhra Pradeshtwo

important states in India.

Colgate and Cavin Kare have shown that communication is key when it comes to

building brands in rural markets. As R. V. Rajan, managing director of the Anugrah

Advertising Agency, adds, To communicate effectively, it is important to understand the

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fears, aspirations, and hopes of the rural consumer. Not to mention the traditions and

stereotypes that have governed their lives for centuries.


While communicating the brand message, marketers must realize that language plays a

prime role. Though a large part of urban India is well versed in English (thanks to the

British and modern television), in rural India, heritage plays a powerful role and regional

languages are predominant. There are 15 regional languages, and 1600 dialects in India,

and as one moves into the countryside, English is replaced with regional tongues. V. S.

Sitaram, Dabur India executive director, explains, Often people treat India as one big

market, but the reality is that India is more like the European Uniona mix of different

cultures, habits and languages. Dabur is also considering the use of South Indiancelebrities to propagate the brand message in South India. Marketing companies not only

need to customize their communication, but in some cases they must also change their

product names to match regional differences. Take toothpaste, for example: Daburs Lal

Dant Manjan (red toothpowder in Hindi) was rechristened as Dabur Sivappu Pal Podi

(red toothpowder in Tamil, the local language) for the South Indian market.

Affordability of the product is also a critical success factor when building brands. A

spokesperson from Tata Group, which retails the Sonata brand of watches to rural India,

says, [rural folks] think of a purchase in terms of how it serves their needs and how well

its suits the family, rather than the individual. Products must be affordable and

immensely practical. Furthermore, since the rural consumer often survives on daily

wages, he engages in daily purchases. Several companies like Cavin Kare, Godrej, and

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Dabur adopted the single use sachet strategy, which has worked in their favor. As Byas

Anand, Senior Manager, Corporate Communications, Dabur India, claims, We

introduced one-rupee sachets (2.5 cents) for Dabur Vatika shampoo which resulted in

doubling of volumes in the rural market.

Though pricing is important, rural consumers favor quality as well. For rural consumers,

a purchase is a bigger investment than it is for the urban, veteran consumer. Hence, a

particular brand will be rewarded only if it earns the rural consumers trust through

consistent product quality. As R.V. Rajan says, the rural consumer is conscious of value

for money, and it might be difficult to convert him to a new brand. However, once

converted he is fiercely loyal to the brand. This issue will be a challenging one for

corporations when they strategize their brand entry and decide how to balance pricingwith brand quality.


The challenge doesnt end with just building brand awareness. While television and

direct marketing activities help rural consumers learn about different brands, ensuring

product availability is even more critical. Marketers in rural India claim that setting up a

supply chain that reaches the remotest rural areas is extremely arduous given the

infrastructure in the country. According to Harish Manwani, chairman of Hindustan

Unilever Limited (HUL), The rural market [centers] are scattered over large areas and

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[their] connectivity to the urban centers is poor. To overcome the distribution challenge

and increase penetration in rural hinterlands, HUL launched a unique operation called

Project Shakti in 2001 (Shakti is a Hindi word which means strength). The project

targeted rural women from existing self-help groups to work as direct-to-home

distributors for HUL products, and helped the company break into a market they were

unfamiliar with.

Malhotra (Linterland) believes that, While Project Shakti might have worked for HUL,

it is not an established channel. Reasons like relatively high capital investment, gender

roles, and taboos could present an upper limit to those sales numbers. According to

Malhotra, a hub and spoke model of distribution is the future. As he explains, We

successfully adopted the hub and spoke model for Dabur India and it has worked verywell. Here, feeder towns, primarily on the highways serve as hubs, where companies can

rent a warehouse and stock their products. [Spokes are comprised of] cyclist salesmen

[who] then distribute products to small retail outlets in nearby rural pockets.

In short, customized and affordable products, effective distribution, and focused

marketing initiatives are essential factors in building credibility for a brand in rural India.

Brand awareness and trust will play a key role in combating the blitz of local copycat

brands that are formidable competition. If marketers tailor make their brand building

initiatives according to the dynamics of the rural market, it may no longer come as a

surprise to see the rural Indian consumer sitting before a Samsung television, enjoying a

bag of Frito-Lay potato chips, and drinking a bottle of Coke.

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INTRODUCTION TO HISTORY OF ITC

ITC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco

Company of India Limited'. Its beginnings were humble. A leased office on Radha Bazar

Lane, Kolkata, was the centre of the Company's existence. The Company celebrated its

16th birthday on August 24, 1926, by purchasing the plot of land situated at 37,

Chowringhee, (now renamed J.L. Nehru Road) Kolkata, for the sum of Rs 310,000. This

decision of the Company was historic in more ways than one. It was to mark the

beginning of a long and eventful journey into India's future. The Company's headquarter

building, 'Virginia House', which came up on that plot of land two years later, would goon to become one of Kolkata's most venerated landmarks. The Company's ownership

progressively Indianised, and the name of the Company was changed to I.T.C. Limited in

1974. In recognition of the Company's multi-business portfolio encompassing a wide

range of businesses - Cigarettes & Tobacco, Hotels, Information Technology, Packaging,

Paperboards & Specialty Papers, Agri-Exports, Foods, Lifestyle Retailing and Greeting

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Gifting & Stationery - the full stops in the Company's name were removed effective

September 18, 2001. The Company now stands rechristened 'ITC Limited'.

Though the first six decades of the Company's existence were primarily devoted to the

growth and consolidation of the Cigarettes and Leaf Tobacco businesses, the Seventies

witnessed the beginnings of a corporate transformation that would usher in momentous

changes in the life of the Company.

ITC's Packaging & Printing Business Division, was set up in 1925 as a strategic

backward integration for ITC's Cigarettes business. It is today India's most sophisticated

packaging house.

In 1975 the Company launched its Hotels business with the acquisition of a hotel in

Chennai which was rechristened 'ITC-Welcomgroup Hotel Chola'. The objective of

ITC's entry into the hotels business was rooted in the concept of creating value for the

nation. ITC chose the hotels business for its potential to earn high levels of foreign

exchange, create tourism infrastructure and generate large scale direct and indirect

employment. Since then ITC's Hotels business has grown to occupy a position of

leadership, with over 65 owned and managed properties spread across India.

In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam

Paperboards Limited, which today has become the market leader in India. Bhadrachalam

Paperboards amalgamated with the Company effective March 13, 2002 and became a

Division of the Company, Bhadrachalam Paperboards Division. In November 2002, this

division merged with the Company's Tribeni Tissues Division to form the Paperboards &

Specialty Papers Division. ITC's paperboards' technology, productivity, quality and

manufacturing processes are comparable to the best in the world. It has also made an

immense contribution to the development of Sarapaka, an economically backward area in

the state of Andhra Pradesh. It is directly involved in education, environmental protection

and community development. In 2004, ITC acquired the paperboard manufacturing

facility of BILT Industrial Packaging Co. Ltd (BIPCO), near Coimbatore, Tamil Nadu.

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The Kovai Unit allows ITC to improve customer service with reduced lead time and a

wider product range.

In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint

venture. Since inception, its shares have been held by ITC, British American Tobacco

and various independent shareholders in Nepal. In August 2002, Surya Tobacco became a

subsidiary of ITC Limited and its name was changed to Surya Nepal Private Limited

(Surya Nepal).

In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper manufacturing

company and a major supplier of tissue paper to the cigarette industry. The merged entity

was named the Tribeni Tissues Division (TTD). To harness strategic and operational

synergies, TTD was merged with the Bhadrachalam Paperboards Division to form the

Paperboards & Specialty Papers Division in November 2002.

Also in 1990, leveraging its agri-sourcing competency, ITC set up the International

Business Division (IBD) for export of agri-commodities. The Division is today one of

India's largest exporters. ITC's unique and now widely acknowledged e-Choupal

initiative began in 2000 with soya farmers in Madhya Pradesh. Now it extends to 7 states

covering over 3.5 million farmers. ITC's first rural mall, christened 'Choupal Saagar' wasinaugurated in August 2004 at Sehore. The year 2006 witnessed the ramping up of the

Company's rural retailing network with 10 'Choupal Saagars' being operational in three

states of Madhya Pradesh, Maharashtra and Uttar Pradesh. Nine more 'Choupal Saagars'

are in an advanced stage of construction and will be launched shortly.

In 2000, ITC's Packaging & Printing business launched a line of high quality greeting

cards under the brand name 'Expressions'. In 2002, the product range was enlarged with

the introduction of Gift wrappers, Autograph books and Slam books. In the same

year, ITC also launched 'Expressions Matrubhasha', a vernacular range of greeting

cards in eight languages and 'Expressions Paperkraft', a range of premium stationery

products. In 2003, the company rolled out 'Classmate', a range of notebooks in the

school stationery segment.

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ITC also entered the Lifestyle Retailing business with the Wills Sport range of

international quality relaxed wear for men and women in 2000. The Wills Lifestyle chain

of exclusive stores later expanded its range to include Wills Classic formal wear (2002)

and Wills Clublife evening wear (2003). ITC also initiated a foray into the popular

segment with its men's wear brand, John Players, in 2002. In December 2005, ITC

introduced Essenza Di Wills, an exclusive line of prestige fragrance products, to select

'Wills Lifestyle' stores. In 2006, Wills Lifestyle became title partner of the country's most

premier fashion event - Wills Lifestyle India Fashion Week - that has gained recognition

from buyers and retailers as the single largest B-2-B platform for the Fashion Design

industry. To mark the occasion, ITC launched a special 'Celebration Series', taking the

event forward to consumers.

In 2000, ITC spun off its information technology business into a wholly owned

subsidiary, ITC Infotech India Limited, to more aggressively pursue emerging

opportunities in this area. In a short span of 5 years, ITC Infotech has already crossed

over US$ 60 million in revenues. It also has a joint venture with ClientLogic, a top five

global Business Process Outsourcing(BPO) provider.

ITC's foray into the Foods business is an outstanding example of successfully blending

multiple internal competencies to create a new driver of business growth. It began in

August 2001 with the introduction of 'Kitchens of India' ready-to-eat Indian gourmet

dishes. In June 2002 ITC entered the confectionery, staples and snack foods segments.

In just five years, the Foods business has grown to a significant size with 100

differentiated products, five distinctive brands, an enviable distribution reach, a rapidly

growing market share and a solid market standing.

In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the entire

value chain found yet another expression in the Safety Matches initiative. ITC now

markets popular safety matches brands like iKno, Mangaldeep, VaxLit, Delite and Aim.

ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked the

manifestation of its partnership with the cottage sector. ITC's popular agarbattis brands

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include Spriha and Mangaldeep across a range of fragrances like Rose, Jasmine,

Bouquet, Sandalwood, Madhur, Sambrani and Nagchampa.

COMPANY PROFILE

ITC is one of India's foremost private sector companies with a market capitalization of

over US $ 13 billion and a turnover of US $ 3.5 billion. Rated among the World's Best

Big Companies by Forbes magazine and among India's Most Respected Companies by

Business World, ITC ranks third in pre-tax profit among India's private sector

corporations.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,

Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology,

Branded Apparel, Greeting Cards, Safety Matches and other FMCG products. While ITC

is an outstanding market leader in its traditional businesses of Cigarettes, Hotels,

Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its

nascent businesses of Packaged Foods & Confectionery, Branded Apparel and Greeting

Cards.

As one of India's most valuable and respected corporations, ITC is widely perceived to be

dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a

commitment beyond the market". In his own words: "ITC believes that its aspiration to

create enduring value for the nation provides the motive force to sustain growing

shareholder value. ITC practises this philosophy by not only driving each of its

businesses towards international competitiveness but by also consciously contributing to

enhancing the competitiveness of the larger value chain of which it is a part."

ITC's diversified status originates from its corporate strategy aimed at creating multiple

drivers of growth anchored on its time-tested core competencies: unmatched distribution

reach, superior brand-building capabilities, effective supply chain management and

acknowledged service skills in hoteliering. Over time, the strategic forays into new

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businesses are expected to garner a significant share of these emerging high-growth

markets in India.

ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is one

of the country's biggest foreign exchange earners (US $ 2.4 billion in the last decade).

The Company's 'e-Choupal' initiative is enabling Indian agriculture significantly enhance

its competitiveness by empowering Indian farmers through the power of the Internet.

This transformational strategy, which has already become the subject matter of a case

study at Harvard Business School, is expected to progressively create for ITC a huge

rural distribution infrastructure, significantly enhancing the Company's marketing reach.

ITC's wholly owned Information Technology subsidiary, ITC Infotech India Limited, is

aggressively pursuing emerging opportunities in providing end-to-end IT solutions,

including e-enabled services and business process outsourcing.

ITC's production facilities and hotels have won numerous national and international

awards for quality, productivity, safety and environment management systems. ITC was

the first company in India to be rated for Corporate Governance by ICRA, an associate of

Moody's Investors Service, which accorded it the second highest rating, signifying "a

high level of assurance on the quality of corporate governance."

ITC employs over 20,000 people at more than 60 locations across India. Ranked among

India's most valuable companies by the 'Business Today' magazine, ITC continuously

endeavors to enhance its wealth generating capabilities in a globalising environment to

consistently reward more than 4,60,000 shareholders, fulfill the aspirations of its

expressively captured in its corporate positioning statement: "Enduring Value. For the

nation. For the Shareholder."

THE ITC VISION

Sustain ITCs position as one of Indias most valuable corporations through world

class performance, creating growing value for the Indian economy and companys

stakeholders.

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THE ITC MISION

To enhance the wealth generating capability of the enterprise in a globalizing

environment, delivering superior and sustainable stakeholder value.

THE ITC CORE VALUES

ITC's Core Values are aimed at developing a customer-focused, high-performance

organisation which creates value for all its stakeholders:

TRUSTEESHIP :As professional managers, we are conscious that ITC has been

given to us in "trust" by all our stakeholders. We will actualise stakeholder value and

interest on a long term sustainable basis.

CUSTOMER FOCUS

We are always customer focused and will deliver what the customer needs in terms of

value, quality and satisfaction.

RESPECT FOR PEOPLE

We are result oriented, setting high performance standards for ourselves as individuals

and teams. We will simultaneously respect and value people and uphold humanness and

human dignity.

We acknowledge that every individual brings different perspectives and capabilities tothe team and that a strong team is founded on a variety of perspectives.

We want individuals to dream, value differences, create and experiment in pursuit of

opportunities and achieve leadership through teamwork.

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EXCELLENCE

We do what is right, do it well and win. We will strive for excellence in whatever we do.

INNOVATION

We will constantly pursue newer and better processes, products, services and

management practices.

NATION ORIENTATION

We are aware of our responsibility to generate economic value for the Nation. In pursuit

of our goals, we will make no compromise in complying with applicable laws and

regulations at all levels.

PREAMBLE :-

Over the years, ITC has evolved from a single product company to a multi-business

corporation. Its businesses are spread over a wide spectrum, ranging from cigarettes and

tobacco to hotels, packaging, paper and paperboards and international commodities

trading. Each of these businesses is vastly different from the others in its type, the state of

its evolution and the basic nature of its activity, all of which influence the choice of the

form of governance. The challenge of governance for ITC therefore lies in fashioning a

model that addresses the uniqueness of each of its businesses and yet strengthens the

unity of purpose of the Company as a whole. Since the commencement of the

liberalisation process, India's economic scenario has begun to alter radically.

Globalisation will not only significantly heighten business risks, but will also compel

Indian companies to adopt international norms of transparency and good governance.

Equally, in the resultant competitive context, freedom of executive management and its

ability to respond to the dynamics of a fast changing business environment will be the

new success factors.

POLICY OF HUMAN RIGHTS

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ITC believes that all its employees must live with social and economic dignity and

freedom, regardless of nationality, gender, race, economic status or religion. In the

management of its businesses and operations therefore, ITC ensures that it upholds the

spirit of human rights as enshrined in existing international standards such as the

Universal Declaration and the Fundamental Human Rights Conventions of the ILO.

Policy

ITC upholds international human rights standards, does not condone human rights

abuses, and creates and nurtures a working environment where human rights are

respected without prejudice.

Implementation

The Corporate Human Resources function of ITC is responsible for the Human Rights

Policy design, implementation and updation.

The policy is implemented at all locations of ITC through a set ofseparate policies and

procedures covering each of the main constituents of human rights applicable at the

workplaces.

Monitoring & Audit

The assessment procedures for different constituents of this policy are defined against

each specific policy.

ITC-FMCG

Cigarettes

ITC is the market leader in cigarettes in India. Its highly popular portfolio of brands

includes Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors,

Capstan, Berkeley, Bristol and Flake.

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ITC's cigarettes are produced in its state-of-the-art factories at Bangalore, Munger,

Saharanpur and Kolkata. These factories are known for their high levels of quality,

contemporary technology and work environment.

ITC's has presence in overseas markets as well. In the extremely competitive US market,

ITC offers high-quality, value-priced cigarettes and Roll-your-own solutions. In West

Asia, ITC has become a key player in the GCC markets through growing volumes of its

brands.

Foods

ITC made its entry into the branded & packaged Foods business in August 2001 with the

launch of the Kitchens of India brand. A more broad-based entry has been made since

June 2002 with brand launches in the Confectionery, Staples and Snack Foods segments.

The Foods business strives to deliver quality food products to the consumer. All products

of ITC's Foods business available in the market today have been crafted based on

consumer insights developed through extensive market research. ITC's state-of-the-art

Product Development facility is located at Bangalore.

The Foods business is represented in 4 categories in the market. These are:

Ready To Eat Foods

Staples

Confectionery

Snack Foods

ITCs six brand of food include:

Kitchens of India

Aashirvaad

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Sun feast

mint-o

Candyman

Bingo!

Lifestyle retailing

ITCs ventured into Lifestyle Retailing Business Division through its Wills Lifestyle

chain of exclusive specialty stores.

Wills Lifestyle, the fashion destination, offers a tempting choice of Wills Classic work

wear, Wills Sport relaxed wear, Wills Club life evening wear, fashion accessories and

Essenza Di Wills an exclusive range of fine fragrances and bath & body care products

and Fiama Di Wills - a range of premium shampoos and shower gels. Wills Lifestyle has

also introduced Wills Signature designer wear, designed by the leading designers of the

country.

With a distinctive presence across segments at the premium end, ITC has also established

John Players as a brand that offers a complete fashion wardrobe to the male youth of

today.

Education & Stationary

ITC made its entry into the stationery business in the year 2002 with its premium range of

notebooks. ITC's Education and Stationery Products are marketed under the brands

"Classmate" and "Paperkraft".

The Classmate range of products is targeted at satisfying education & stationery needs of

students & young adults. The product range includes Notebooks, Math Instruments,

Scholastic Products as well as Writing Instruments.

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The Paperkraft range of products aims at satisfying the stationery needs & office

consumables need of office executives & working professional. The continuously

expanding product range under Paperkraft includes Premium Business Paper, Paper

Stationery, Markers & Highlighters.

Safety Matches

ITCs range of Safety matches include popular brands like i Kno, Mangaldeep, Aim, Aim

Mega and Aim Metro. With differentiated product features and innovative value

additions, these brands effectively address the needs of different consumer segments. The

Aim brand is the largest selling brand of Safety Matches in India.

ITC also exports regular and premium safety matches brands to markets such as Middle

East, Africa and the USA. ITC aims to enhance the competitiveness of the small and

medium scale sectors through its complementary R&D based product development and

marketing strengths, especially the breadth and depth of the Company's trade marketing

and distribution.

Aggarbattis

ITC commenced marketing Agarbattis (Incense Sticks) sourced from small-scale andcottage units in 2003. Mangaldeep Agarbattis are available in a wide range of fragrances

like Rose, Jasmine, Bouquet, Sandalwood, Madhur, Durbar, Tarangini, Anushri, Ananth

and Mogra.Durbar Gold is a new offering from Mangaldeep launched in Andhra Pradesh

and has received wide consumer acceptance. The premium range from ITC, Mangaldeep

Spriha has two offerings, Pratiti and Sarvatra and is specially hand rolled by Cottage

Industries, Sri Aurobindo Ashram, Pondicherry.

Personal care

ITC forayed into the Personal Care business in July 2005. In the short period since its

entry, ITC has already launched an array of brands, each of which offers a unique and

superior value proposition to discerning consumers. Anchored on extensive consumer

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research and product development, ITC's personal care portfolio brings world-class

products with clearly differentiated benefits to quality-seeking consumers.

ITC's Personal Care portfolio under the 'Essenza Di Wills', 'Fiama Di Wills', 'Vivel Di

Wills' 'Vivel UltraPro', 'Vivel' and 'Superia' brands has received encouraging consumer

response and is being progressively extended nationally.

ITC's state-of-the-art manufacturing facility meets stringent requirements of hygiene and

benchmarked manufacturing practices. Contemporary technology and the latest

manufacturing processes have combined to produce distinctly superior products which

rank high on quality and consumer appeal.

Bingo!

:: Snack foods

Bingo! was launched in March 2007 with a wide range of

exciting packaged salted snacks. The range includes multiple flavor variants of Potato

Chips & Finger Snacks.

The brand is associated with youth, fun and excitement. It fulfills the consumers need for

variety and novelty in snacks.

At present Bingo! has 3 sub-brands in its portfolio, each of which have unique values

based on product differentiators.

Bingo! Potato Chips the crunchiest potato chips:

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Bingo! Potato Chips are all about irresistible combinations. They are a combination of

crunchy potato chips along with yummy flavors. These flavors range from traditional

favorites like Salted to innovative ones such as Red Chilli & Lime Pickle

Whats new?

Bingo! Pickle Tickle: Some lemons remain lemons, the tastier ones become lime

pickle. But the naughty pickled lemons escape the jar, mix with crunchy potato chips to

tickle your taste buds! A bite of the mouth watering Bingo! Pickle Tickle Potato Chips

with just the right spicy and sour flavor of pickled lime in crunchy potato chips. It will

surely make the taste buds crave for more! Pickle Tickle is currently being launched in

the Southern parts of India.

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Bingo! Mad Angles "har angles se Mmmm"

One of the biggest successes from the Bingo! portfolio, Bingo! Mad Angles has carved a

niche for itself in the consumers mind and is synonymous with the perfect triangular

snack.

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A combination of innovative flavours on a traditional khakra base, Mad Angles is a snack

that is true to taste and perfect flavour delivery as well as shape, making it a snack thats

truly "har angles se Mmmm"

What's new?

Bingo! brings you the chaat flavour that you can savour without having to stop by the

"gali ka chaatwala".

Let your fingers dive in to the perfect combination of the taste of fresh pudina, tangy

tamarind, creamy yogurt and of course, the crunchiness of khakra triangles. Available in

packs of Rs.5, Rs. 10 and Rs. 20, the new Bingo! Mad Angles Masti Chaat now adds to

the excitement of Mad Angles range from Bingo!


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Bingo! Tedhe Medhe A twist in every stick

Bingo! Tedhe Medhe is the popular spindle shaped format from

Bingo! that is a delicious blend of handpicked spices with an aroma that makes one crave

for more. The taste of fiery sparks which masalas leave on ones tongue is an experience

with savouring!

Just like no two things in life are the same, Bingo! Tedhe Medhe provides a unique

experience to the consumer each time he consumes it from the pack, making him go

beyond stereotypes and celebrating the eccentricities in life!

Bingo! ITC turns around foods business

ITC, the paper to hotels conglomerate, which saw its non-FMCG cigarette business

revenues rise by 24 per cent in the quarter ended December 2010, has managed to turn

around its foods business.Chitranjan Dar, divisional chief executive, ITC said the division

was now profit-making and he expected it to remain profitable despite a steep rise in

input as well as transport costs. ITC, whose pre-tax profits for the quarter ending

December 2010 grew 19.4 per cent to cross the Rs 2,000-crore mark has been investing

in a raft of businesses from hotels, paper board to FMCGs. It aims to utilise revenues

from its tobacco business to build up a profitable franchise in other areas.

The Bingo! range of potato chips saw sales growing by 48 per cent during the December

2010 quarter. In the biscuits category, sales of Sunfeast grew by 28 per cent during the

quarter driven by product mix improvement led by significant growth in the sales of

value-added variants of cookies and creams. Snacks and biscuits are the major driver of

the foods business growth, said Dar.

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While sales are rising at a rapid clip so are costs such as those of packaging that have

gone up between a fifth to a quarter. The foods business has been using levers such as

product mix enrichment, higher net realisation, smart commodity sourcing and active cost

management across the supply chain to get into the black. Ultimately, increasing our

share in a growing market will help ameliorate some of the costs pressures. We are

therefore focussed on internal efficiencies so that we only have to pass on between half to

60 per cent of the cost price increases to our end customers, said Dar.

ITCs Foods Division said Dar is now big enough to invest in new categories every year

without relying on the parent for funds. This kind of a calibrated approach will allow us

to remain profitable, he said. In September 2010 the company had launched Sunfeast

Yippee! Noodles,while selling Aashirvaad atta and branded spices.ITC claims that postthe launch of some combo offers on noodles and pasta, sales in both these categories are

doing well. Our distribution today is almost 70 per cent of HULs food business and we

are constantly working to grow that, said Dar.

SWOT ANALYSIS OF ITC

Strengths

ITC leveraged it traditional businesses to develop new brands for new segments. ITC is a

diversified company trading in a number of business sectors including cigarettes, hotels,

paper, agriculture, packaged foods and confectionary, branded apparel, personal care,

greetings cards, Information Technology, safety matches, incense sticks and stationery.

Weaknesses

To fund its cash guzzling FMCG start-up, the company is still dependant upon its tobacco

revenues. Cigarettes account for 47 per cent of the company's turnover, and that in itself

is responsible for 80% of its profits. So there is an argument that ITC's move into FMCG

(Fast Moving Consumer Goods) is being subsidised by its tobacco operations. Its Gold

Flake tobacco brand is the largest FMCG brand in India - and this single brand alone

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holds 70% of the tobacco market. Unrelated diversification is also a major weakness of

ITC.

Opportunities

Core brands such as Aashirwad, Mint-o, Bingo! And Sun Feast (and others) can be

developed using strategies of market development, product development and marketing

penetration.ITC is moving into new and emerging sectors including Information

Technology, supporting business solutions.

e-Choupal is a well thought of initiative that could be used in other sectors in many other

parts of the world. It is also an ambitious project that has a goal of reaching 10 million

farmers in 100,000 villages

Per capita consumption of personal care products in India is the lowest in the world

offering an opportunity for ITC's soaps, shampoos and fragrances under their Wills

brand.

Threats

The obvious threat is from competition, both domestic and international.

ITC's opportunities are likely to be opportunities for other companies as well. Therefore

the dynamic of competition will alter in the medium-term. Then ITC will need to decide

whether being a diversified conglomerate is the most competitive strategic formation for

a secure future.

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OBJECTIVES OF STUDY

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OBJECTIVE OF THE STUDY

To study the Rural marketing , its opportunities and challenges.

To know the Important factors that influence rural consumer buying behaviour of

ITC products.

To know the visibility and availability of ITC brand in rural areas.

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LITERATURE REVIEW

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LITERATURE REVIEW

Sarangapani & Mamtha, (2008) With the increase in purchasing power and demand for

a wide variety of products by the rural consumers, the rural markets offer new and greater

opportunities to manufacturers of several FMCG products in India. To tap the vast and

expanding market, companies are developing effective marketing and strategies based on

their study and understanding of rural consumer behaviour. There are certainly significant

differences in the buying behaviour of the rural consumers from the stand point of

product development, pricing policies, distribution and after sales services, which create

differences in requirements for marketing strategies in rural India.

Mathursuch,( 2008) The concept Rural and Marketing, though used very frequently

in various forums, have eluded any precise and non- controversial definitions. When we

join them, the resulting concept Rural Marketing means different things to different

persons. This confusion leads to distorted understanding of the problems of rural

marketing poor diagnosis and, more often than not, poor prescriptions.

The Indian rural market with its vast size and demand base offers great opportunities to

marketers. Two thirds of countries consumers live in rural areas and almost half of the

national income is generated here. It is only natural that rural markets form an important

part of the total market of India. Our nation is classified in around 450 districts, and

approximately 630000 villages, which can be sorted in different parameters such as

literacy levels, accessibility, income levels, penetration, distances from nearest towns,

etc.

Mckinsey, (2008), rural India with a population of 630 million (approximately) would

become bigger than total consumer market in countries such as South Korea or Canada in

another 20 years and it will grow at least four times from its existing size.

70% of Indias population lives in 627000 villages in rural areas. As per the National

Council for Applied Economic Research (NCAER) study, there area as many middle

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income and above households in the rural areas as there are in the urban areas. At the

highest income level there are 2.3 million urban households as against 1.6 million

households in rural areas. According to NCAER projections, the number of middle &

high income households in rural India is expected to grow 80 million to 111 million by

2007.However, myths abound. Indias rural markets are often misunderstood. A clear

distinction needs to be made with regard to the reality versus the image of rural India. If

such a distinction is not made, we will be unable to distinguish between the serpent and

the rope.

Arjiea,(2009) : Promotion of brands in rural markets requires the special measures. Due

to the social and backward condition the personal selling efforts have a challenging role

to play in this regard. The word of mouth is an important message carrier in rural areas.

Infect the opinion leaders are the most influencing part of promotion strategy of rural

promotion efforts. The experience of agricultural input industry can act as a guideline for

the marketing efforts of consumer durable and non-durable companies. Relevance of

Mass Media is also a very important factor.

Pravin Tripathi,(2009) Nirma was the first FMCG Company which initiated and

produced goods according to the rural consumers in 1970. Nirmas entry changed the

whole Indian FMCG scene. It became a great success story and laid the road map for

others to follow.

Luv2maan,(2009) The rural market has changed drastically in the past one decade. A

decade ago, the rural market was more unstructured and was not a prioritised target

location for corporates. Very few companies, mainly the agro-based ones, were

concentrating in these markets. Their were no innovative strategies and promotional

campaigns. A distribution system did exist, but was feeble. Illiteracy and lack of

technology were the other factors leading to the poor reach of products and lower level of

awareness amongst villagers.

Gradually, corporates realised that there was saturation, stiff competition and clutter in

the urban market, and a demand was building up in rural areas. Seeing the vast potential

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of 75 per cent Indians living in rural areas, they started focusing on these unexplored,

high-potential areas.

Shuchitiwari, (2010) The rural market is not homogeneous. The individual sections of

this market are not too big, although the overall size is large. There are Geographical,

demographical, statistical and logistical differences. Positioning and realities regarding

the potential of each of these market segments differ and lie at the very core of forming

the strategy for the rural markets. Gone are the days when rural consumer went to nearby

city to buy branded products & services.

Serene,(2010) Rural marketing is the much talked subject for the business

establishment. A decade ago rural market was seem to be unstructured and this was not

found to be a target location of the corporate. This is due to the hurdles such as illiteracy,

lack of technology and other factors leading to the poor reach of products. But now Go

Rural is the slogan of marketing gurus after analyzing the so

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