How does below monsoon affect the consumer behaviour in rural markets?
The reality is that agriculture now accounts for only 30 percent of rural GDP, down from over 50 percent a decade ago. Manufacturing and Services sectors now contribute more to rural GDP. So, a weak monsoon can impact only the agriculture income and that too one of the two major cropping seasons. Land area under irrigation has also gone up significantly in the last decade. So, the crop output will come down only marginally if the monsoon is more than 90 percent of the mean average. However, a weak monsoon does affect the sentiment of the people, they hold back spending. Consumer behaviour is somewhat similar to what we see in the stock exchange, it is driven by sentiment and little logic. Fortunately, with salaried employment doubling over the last decade from 11 percent to 22 percent of rural employment, there is more regularity of income in rural households. This is the beginning to change behaviour and we do not see any significant down trading of brands during a weak monsoon year.
What would like to suggest to the marketers focussing into rural areas during this monsoon?
Every industry has a business cycle, several years of good demand is followed by a bad year. In rural markets, it is several good monsoons is followed by a weak monsoon. Marketers should not flirt with the rural market, they should marry it. In other words, marketers should take a long term view and not a quarter on quarter or from one monsoon to the next. They need to invest in market development, create opportunities for livelihoods for the poor and innovate affordable products using a community co-creation process involving the rural consumer at every stage of new product development.
How do you expect the growth of rural market this year?
Both consumption and penetration of most product categories is much lower in rural than in urban. So there is a huge opportunity for growth which will depend on incomes. Per acre income has been on the rise because of better practices, mechanisation and shifting cropping pattern to fruits, vegetables and other cash crops. Non-farm incomes have also been growing because more and more rural youth are getting skilled and finding jobs in factories and establishments coming up in the nearby small towns. So, I expect a steady growth in rural demand this year as well. Let us not forget in the initial years growth figures were impressive because this was on a small base. Today, rural accounts for 50 percent consumption for most categories and hence growth on this expanded base will look less impressive. But, in numbers, volumes and weight, it will be more than the past.